Impact of Corporate Governance on Financial Governance: A Project

This project investigates the impacts of corporate governance on financial governance within a company. It begins by defining corporate governance and its significance in financial decision-making, emphasizing the roles of accountability, integrity, and transparency. The project explores the evolution of corporate governance and its influence on economic development, including the impact of corporate governance on the financial management of a company. The project reviews literature to analyze the relationship between corporate governance and financial performance, examining studies that indicate positive, negative, and insignificant relationships. The methodology section outlines the use of secondary data from sources like journal articles and company reports, employing correlation analysis to quantify the impact of corporate governance. The findings highlight how corporate governance contributes to financial stability through effective teamwork and the board's independence. The project concludes by summarizing the benefits of corporate governance in enhancing financial profits and leadership, emphasizing ethical values like accountability and transparency.

Running head: PROJECT 1
Impacts of Corporate Governance in Financial Governance in Company
Student Name
Institution
date of submission

PROJECT 2
Table of Contents
1.introduction..............................................................................................................................3
1.1 background........................................................................................................................3
1.2 Definition..........................................................................................................................3
1.3 Justification.......................................................................................................................4
1.4 Aims..................................................................................................................................4
1.5 Research questions............................................................................................................4
2. Critical literature review.........................................................................................................5
2.1 Financial performance as dependent variable...................................................................5
2.1.1 Studies indicating negative relationship.....................................................................6
2.1.2 Studies indicating a positive relationship...................................................................6
2.1.3 Studies indicating a no significant relationship..........................................................6
2.2 Corporate governance as dependent variable....................................................................7
3. Methodology...........................................................................................................................7
4. Findings...................................................................................................................................8
5. Discussion...............................................................................................................................8
6. Conclusion..............................................................................................................................9
7. References.............................................................................................................................10

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1.introduction
Corporate governance greatly affects the financial governance in a company. The corporate
governance is a significant factor when making company's investment decisionscompany aboards,
management terms and the stakeholders observe when they perform their responsibilities (Yates,
2010). A company that practices corporate governance achieves the desired results since
accountability, integrity, and objectivity is practiced. Corporate governance includes the long-term
management and the oversight of the company by principles of transparency and responsibility.
When corporate governance is good, it provides a very transparent set of the rules and also controls in
areas where stockholders, officers, and directors have aligned the incentives. Most of the companies
strive to have a very high level of sound corporate governance for it to be profitable and perform
significantly (Cheng, Ioannou, & Serafeim, 2014). Good corporate governance leads to economic
development. This project discusses the impact that corporate governance has in the financial
management of a company.
1.1 background
The corporate governance started in vogue in the 1970s in united states of America. Within a
minimum of 25 years, the corporate governance had become a subject matter to debate on worldwide
by regulators, executives academics, and the investors. Due to increasing company competition, the
company has decided to have corporate governance on their board. This corporate governance has
been accepted in law, politics and business practices for the companies benefit the corporate
governance have been evolving in different ways in different countries in the world (Claessens, &
Yurtoglu, 2013). It has created distinct systems in those countries, and it is relevant for the company
to perform. As the primary purpose of corporate governance on improving the financial status of a
company is enabled by good relations with the stakeholders of the company through sustainability.
1.2 Definition
Corporate governance refers to the system or set of practises, customs, policies, laws, processes, and
rules which the companies are directed and controlled. Corporate governance is the framework of the
stipulations which describe the limits under which each of segment of the stake holders should operate

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and safeguard the company's interests. Also, aspects of corporate governance involve the balancing of
company interests by the key stakeholders who include the customers, investors, financiers,
management, suppliers, government, the society at large and shareholders (Jizi et al., 2014). The
framework under which companies achieve their set objectives depends on the nature of corporate
governance within the concerned enterprise; Financial management involves the aspect of cost and
revenue ascertainment within an organization to ensure that every dollar is put to the appropriate use.
The proper functioning of internal control systems within a company depends on the nature of
corporate governance within an entity.
1.3 Justification
The principle of corporate governance assists companies in creating the right quality of services as
demanded by the clients. The provision of quality services improves the company's reputation to the
target market, and this contributes to the improved productivity and profitability. Improved profits by
a firm lead to the growth, development, and sustainability of a company in the industry under which it
operates both in the short term and in the long run (Khan, Muttakin, & Siddiqui, 2013). This study
will help in studying the effects of good corporate governance in the proper financial management and
performance of a company. This report helps in would address the impact of economic management as
in the society.
1.4 Aims
The primary objective of this study is to examine and analyze the effects of corporate governance in
the financial governance and performance of a company.
1.5 Research questions
To achieve the above objective, this report will be built on three research questions as a tool to
examining the effects of corporate governance in a company's financial performance. Thy is:
i. What are the impacts of corporate governance in the financial governance of a company?
ii. Can companies achieve financial stability through good corporate governance?
iii. How can a company use its finances in society development?

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2. Critical literature review
The corporate governance has brought many impacts in the business which includes the provision of
the board of the company with the independence from the team management and the stakeholders of
that company. It also empowers the board of the business to perform its duties without unnecessary
interference from the company's management or the dominant shareholders to avoid massive losses of
company finances (Mason & Simmons, 2014). This is a way of direction and control to the business
finances to prevent misuse and massive losses which the company may undergo under poor
management.
The system of good corporate governance which is clear and functioning helps the company to attract
high investment, strengthen firm foundation in performance and to raise the company's funds in a large
numbers. This leads to more attractions to investors on those businesses that have favorable corporate
governance factors as they are less risky to losses and they have high yields which come out at the end
of production (Michelon & Parbonetti, 2012). This attracts financial stability of the company.
The company can use its finances for community development. This is by bringing up some projects
that are beneficial to the society. These projects include construction of roads, bridges, and provision
of essentials in the hospitals and schools to ensure the smooth running of society activities (Morellec,
Nikolov, & Schürhoff, 2012). Corporate governance also unites the community together to stay
with peace and harmony.
2.1 Financial performance as dependent variable
Research shows that corporate governance has a relationship with the overall corporate financial
performance of a company (Tricker & Tricker, 2015). There exists a correlation effect between the
financial performance of a company to the corporate governance practices offered by a given firm.
These two variables relate both positively and negatively hence positive and negative correlation
coefficient exists in them. Further, research shows that the two variables may show insignificant
interrelationships and this is discussed as below.

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2.1.1 Studies indicating negative relationship
Companies must exercise good corporate governance practices to become profitable and operate
within the set standards in the industry. Exercising healthy competition in the market requires that a
company be innovative and understand the competitors well. This then requires a company to exercise
loyalty with the target market. Again, there is need to enhance accountability, objectivity, and integrity
by the management of a company to achieve the set goals (Velnampy & Pratheepkanth, 2013).
Strengthening financial corporate governance requires proper record keeping and the establishment of
appropriate internal controls. Any form of fraud, deception, and creative accounting must be
discouraged to realize success in financial stability. Therefore, this study indicates that economic
instabilities by a company may act as a disadvantage that leads to a negative relationship between the
enterprise and its stakeholders. Financial instability discourages investment.
2.1.2 Studies indicating a positive relationship
Corporate governance has positive significant to the financial performance of the company. The
company with higher corporate governance gains greater financial stability as they use their assets
differently to give positive financial results. This is because the managers and workers of the company
are skilled socially aware and concerned to generate high financial profits thus making the firm to
invest more (Yates, 2010). Hence, corporate governance creates a positive relationship between the
company and its stakeholders when financial stability is enhanced, and this attracts high investment in
the enterprise.
2.1.3 Studies indicating a no significant relationship
There are other studies that show there is no significant relationship between the corporate governance
and the financial performance of the company. The examination has been carried out to find a report
on how corporate governance does not affect the financial stability of a company. However, the
researchers believe that there is no significant market reaction showing the assurance of sustainability
report that reveals there is no significant correlation between the corporate governance and the
financial performance of the company (Yates, 2010). The conclusion is that having corporate
governance in a company doers not affect the corporate financial stability of that company.

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2.2 Corporate governance as dependent variable
Another research has made opposite relation between the two variables. That is the financial
performance of a company being independent variable and the corporate governance being a
dependent variable. The corporate governance as a dependant variable leads to better performance of a
company in financial matters. Corporate governance helps in the improvement of business
performance since the financial stability is enhanced (Walls, Berrone, & Phan, 2012). There is
increased productivity and sustainability where corporate governance rules prevail. People in the
company show integrity, confidentiality, objectivity, and accountability of all transactions and events
leading to monetary creation. As a result, a company gains competitive advantage against its rivals
hence enhanced reputation in the public domain. Financial credibility of a company is also enhanced
by good corporate governance, and this should be encouraged in every company.
3. Methodology
In deciding on choosing method in the measure of the impact of corporate governance and financial
performance of a company, the project’s problem as stated creates a fundamental role in realizing the
set aim. In this research, their is a different data collected from secondary sources examing whether
the presence of corporate governance in a company affects the financial status of that company.
This study is based on secondary sources of data to meet the set objectives. The secondary data
sources employed include journal articles, the internet, academic research books, different company
annual reports, and sustainability reports. The data collected is helpful in quantifying the corporate
governance impacts on the ultimate performance of a company (Mansoor Khan, & Ishaq Bhatti,
2008). The correlation analysis has been used to quantify the negativity, positivity, and significance of
the topic under discussion as applied to various companies. The nature of corporate governance and
financial performance of a company relationship has been made possible by the use of correlation
coefficient.

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4. Findings
Corporate governance in a society plays a crucial role in stabilizing and making higher profits to the
company. Corporate governance sets rules and regulations that must be followed by the workers and
the managers of the company to make it business profitable. The corporate governance is committed to
making a positive contribution through delivering the best outcomes for their shareholders by making
decisions together and equally to all workers. Thus corporate governance plays an integral part in
company strategy having more benefits regarding corporate governance measurement and evaluation
hence resulting in positive impact on profit of finances (Eccles, Ioannou, & Serafeim, 2014). Also,
corporate governance has improved in the teamwork of the board and efficient usage of funds without
wastage. This has also contributed to increasing of financial profits of the company.
Also, the research shows that corporate governance has provided the board with independence that is
to work freely for the enterprise without disturbance or hurry. This has enabled the company to do
well regarding financial matters as there is accurate accountancy which improves the financial status
of the enterprise.
5. Discussion
The engagement of corporate governance in a company has increased financial profits in that business.
This has been achieved through the teamwork of the corporate governance and the board of the
business and also the independence of the workers thus ensuring high financial profits. The corporate
governance is essential for effective leadership in most companies. The leadership is characterized by
an ethical value such as accountability, fairness, responsibility, and transparency of the leaders who
are involved in the enterprise so that they can achieve financial stability with good corporate
governance (Ashbaugh-Skaife, Collins, & LaFond, 2006). Also, corporate governance helps the
company to attract high investment due to high profits. This makes the investors proud of the workers
hence the are rewarded appropriately through salary and wages increase, or promotions which are very
essential to workers.

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6. Conclusion
In conclusion, due to the high competition of company's products and high losses of finances, the
corporate governance is very essential to growth and to have positive influence to the company
financially. This corporate governance has reduced risky of being competitive to market and losing of
finances. It has also provided the workers with the freedom to work freely for the benefit of the
company hence resulting in high profits for the company.

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7. References
Ashbaugh-Skaife, H., Collins, D. W., & LaFond, R. (2006). The effects of corporate
governance on firms’ credit ratings. Journal of accounting and economics, 42(1), 203-243.
Cheng, B., Ioannou, I., & Serafeim, G. (2014). Corporate social responsibility and access to
finance. Strategic Management Journal, 35(1), 1-23.
Claessens, S., & Yurtoglu, B. B. (2013). Corporate governance in emerging markets: A
survey. Emerging markets review, 15, 1-33.
Eccles, R. G., Ioannou, I., & Serafeim, G. (2014). The impact of corporate sustainability on
organizational processes and performance. Management Science, 60(11), 2835-2857.
Jizi, M. I., Salama, A., Dixon, R., & Stratling, R. (2014). Corporate governance and corporate
social responsibility disclosure: Evidence from the US banking sector. Journal of Business
Ethics, 125(4), 601-615.
Khan, A., Muttakin, M. B., & Siddiqui, J. (2013). Corporate governance and corporate social
responsibility disclosures: Evidence from an emerging economy. Journal of business
ethics, 114(2), 207-223.
Mansoor Khan, M., & Ishaq Bhatti, M. (2008). Development in Islamic banking: a financial
risk-allocation approach. The Journal of Risk Finance, 9(1), 40-51.
Mason, C., & Simmons, J. (2014). Embedding corporate social responsibility in corporate
governance: A stakeholder systems approach. Journal of Business Ethics, 119(1), 77-86.
Michelon, G., & Parbonetti, A. (2012). The effect of corporate governance on sustainability
disclosure. Journal of Management & Governance, 16(3), 477-509.

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Morellec, E., Nikolov, B., & Schürhoff, N. (2012). Corporate governance and capital structure
dynamics. The Journal of Finance, 67(3), 803-848.
Tricker, R. B., & Tricker, R. I. (2015). Corporate governance: Principles, policies, and
practices. Oxford University Press, USA.
Velnampy, T., & Pratheepkanth, P. (2013). Corporate Governance and Firm Performance. A
study of Sri Lankan.
Walls, J. L., Berrone, P., & Phan, P. H. (2012). Corporate governance and environmental
performance: Is there really a link?. Strategic Management Journal, 33(8), 885-913.
Yates, J. A. (2010). The influence of entrepreneurship on the relationship between corporate
goverence and corporate performance (Doctoral dissertation, Kingston University).