Corporate Governance Mechanisms and Business Performance Analysis

This report examines the impact of corporate governance mechanisms on business performance, focusing on both internal and external factors. It begins by defining corporate governance, exploring various governance practices within organizations, and outlining the benefits of implementing such practices. The report then delves into the impact of external and internal corporate governance mechanisms, analyzing their influence on business outcomes. A literature review provides insights into the concept of corporate governance, different governance practices, and the mechanisms' effect on business performance. The study adopts a comparative approach, examining corporate governance laws in Australia and the UK. The report also highlights the importance of transparency, accountability, and ethical working practices, and their contribution to organizational success. The study aims to analyze the impact of external and internal corporate governance mechanisms on the performance of businesses.

Corporate Governance and
Law
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Contents
TITLE – “Impact of external and internal corporate governance mechanisms on performance of
businesses.”......................................................................................................................................3
INTRODUCTION...........................................................................................................................3
Context of study.....................................................................................................................3
Aims and Objectives...............................................................................................................3
1. What is the concept of corporate governance and what are the different governance
practices that an organisation implement within workplace?.................................................4
2. Which are the different benefits that business organisations get by introducing corporate
governance practices within the organisation?.......................................................................4
3. What is the impact of external and internal corporate governance mechanisms on
performance of businesses?....................................................................................................4
Rationale of study...................................................................................................................4
LITERATRE REVIEW...................................................................................................................5
1. The whole concept of corporate governance and different governance practices that an
organisation implement within workplace.............................................................................5
2. Different benefits that business organisations get by introducing corporate governance
practices within the organisation............................................................................................6
3. The impact of external and internal corporate governance mechanisms on performance of
businesses...............................................................................................................................7
PROPOSED METHODOLOGY.....................................................................................................8
PROPOSED STRUCTURE OF THE STUDY.............................................................................13
REFERENCES..............................................................................................................................14
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3

TITLE – “Impact of external and internal corporate governance mechanisms on
performance of businesses.”
INTRODUCTION
Context of study
Corporate Governance can be stated as the combination of processes, rules or laws through
which the organisations are regulated, operated and controlled. It encompasses external and
internal forces which influence the interest of stakeholders of organisation. The governance
structure specifies the responsibilities and rights of distinct participants in organisation with
regard to outside parties and one another. These laws mainly associated with the boards of
directors, creditors, regulators, auditors, manages, shareholders and other stakeholders. By
governance system, an organisation set and pursue its main objectives as well as serve as
mechanism to monitor the actions, decisions and policies of different levels of management in
business. The laws of corporate governance vary broadly from state to state. Many selected to
form organisations in one jurisdiction over other due to these laws. In some instances, the laws
may also have an influence upon the tax obligations (Corporate Governance Law, 2021). This
dissertation study is based on title “Impact of external and internal corporate governance
mechanisms on performance of businesses” and it aims to analyse the concept and
implementation of corporate governance in the corporate entities. The study also has some
objectives which assist in directing the overall study and enable researcher to accomplish main
aim of dissertation in an effective and efficient manner. The research objectives and questions
are provided below which help in providing guidance to the researcher to fulfil the study aim.
Aims and Objectives
Research Aim:
The main aim associated with this study is “To analyse the impact of external and
internal corporate governance mechanisms on performance of businesses.”
Research Objectives:
The key objectives in relation to this dissertation study are as follows:
1. To understand the whole concept of corporate governance and different governance
practices that an organisation implement within workplace.
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2. To identify the different benefits that business organisations get by introducing corporate
governance practices within the organisation.
3. To assess the impact of external and internal corporate governance mechanisms on
performance of businesses.
Research Questions:
The research questions in context of this dissertation study are provided below:
1. What is the concept of corporate governance and what are the different governance
practices that an organisation implement within workplace?
2. Which are the different benefits that business organisations get by introducing corporate
governance practices within the organisation?
3. What is the impact of external and internal corporate governance mechanisms on
performance of businesses?
Rationale of study
This study is based on the title “Impact of external and internal corporate governance
mechanisms on performance of businesses” and it aims to analyse the impact of external and
internal corporate governance mechanisms on performance of businesses. Performing this study
is effective for the researcher as by the assistance of the study, the investigator will be able to
acquire knowledge about the corporate governance and law along with its description,
classification, comparison, explanation, evaluation and recommendation. This study is highly
effective in understanding the corporate governance laws in Australia and is compared and
contrasted with the laws of United Kingdom. Moreover, it also helps in determining the different
corporate governance practices that an organisation use. Apart from this, this study is effective in
gaining an understanding about concept of corporate governance as well as the way it is
implement in the organisations. In addition to this, there are various benefits of adopting
corporate governance within the business. This study is effective in analysing the benefits that an
organisation can get by ensuring corporate governance in business. Adopting different
governance practices will also help in improving the image of organisation in the market and
provides it with competitive advantage over the competitors. It ensures transparency and clarity
in the business processes, which in turn ensure ethical working in the organisation. Thus, this
study is highly effective in gaining deep insights on the particular area of study. Moreover, the
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study is also effective for the academic purpose as it can be taken as base by the other scholars to
perform further study on the similar topic or the related topic.
LITERATRE REVIEW
1. The whole concept of corporate governance and different governance practices that an
organisation implement within workplace
As per the information provided by the Looi, Allison, and Bastiampillai, 2020, it has been
analysed that the concept of corporate governance is basically reflects a system that is used to
control and direct the operations of a company. Further, the boards of the directors are the one
who are responsible for setting out effective corporate governance within their companies. The
legal structure and law associated with corporate governance in Australia is basically shaped and
evolved by the framework of legal rules, soft law along with based on market expectations.
Beside this, it has been analysed that the Australian Securities and investments commission is the
one who is responsible to focus on the corporate governance related law and pollicises in
Australia. Beside this, it has been also analysed that the like the other countries such as in UK,
Australia does not have a general corporate governance code that is needed to be followed or
comply with all companies (What is corporate governance? 2021).
Apart from this, with respect to the information, Miglani, Ahmed, and Henry, (2020),
many recent corporate governance trends and reforms are proposed by the jurisdiction to have
control over the Illegal Phoenix activity within the firms. In February 2020, the Parliament of the
Australia has passed the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020
(Cth) (Phoenixing Act) to combat phoenix activity. Beside this, the Australian companies are
established under a federal statue and have to comply with the Corporations Act, 2001 as per the
cat that is common law which comprise of various rues that regulate the internal affairs of a
company. Beside this, the several features of the Corporation act also significance the corporate
governance which comprises of the fact that the legislation provides a legal right to the public
company shareholders with mandatory rights to initiate and vote on amendments to their
company’s constitution along with power to remove directors without cause. Further, a
comparison with the corporate governance in UK could also be made as in the UK for all the
listed companies the concept of corporate governance has been taken as a part of the legal
system. In UK, the UK Corporate Governance Code tend to apply for all the accounting periods
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that are beginning on or after 29 June 2010 and as a result of this the new Listing Regime
introduced in April 2010, applies to all companies with a Premium Listing of equity shares
regardless of whether they are incorporated in the UK or elsewhere. As per the information
provided by the Looi, J.C., Allison, S. and Bastiampillai, T., 2020, it has been analysed that the
concept of corporate governance is basically reflects a system that is used to control and direct
the operations of a company. Further, the boards of the directors are the one who are responsible
for setting out effective corporate governance within their companies. The legal structure and
law associated with corporate governance in Australia is basically shaped and evolved by the
framework of legal rules, soft law along with based on market expectations. Beside this, it has
been analysed that the Australian Securities and investments commission is the one who is
responsible to focus on the corporate governance related law and pollicises in Australia. Beside
this, it has been also analysed that the like the other countries such as in UK, Australia does not
have a general corporate governance code that is needed to be followed or comply with all
companies (What is corporate governance?, 2021).
2. Different benefits that business organisations get by introducing corporate governance
practices within the organisation
As per the view point of Pargendler, (2016), Corporate governance is stated as the way an
organisation chooses to govern itself. It is accompanied by the set of rules which administers
direction as well as control to organisation towards accomplishing its objectives. Effective
governance in the organisation means that the processes of business are aimed at developing
outcomes that mitigate the requirements of society as well as organisational prosperity when
making strategic utilisation of resources. There is a direct link between corporate governance
practices and better performance of organisation. Effective corporate governance has become
main area of emphasis for business in order to position itself favourably to with stand complex
economic climate. Today, companies are expected to undertake actions which have beneficial
effect on their stakeholders including suppliers, employees and community at large. A strong
culture of compliance correlates equally with enhanced performance. It provides various benefits
to organisation in terms of increased success rate a financial performance as well as improve
sustainability, develops greater ability attracting and retaining talent, built repetition, legacy and
morale, develops an effective framework which aims to mitigate the objectives of business,
develop more opportunities to attain competitive advantage, administer respectable way to direct
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decision making at all the levels of organisation. Apart from these benefits, there are some other
benefits of having good corporate governance within the organisation. Beside this, it has been
analysed that good corporate governance within the organisation encourage positive behaviour at
workplace. If the organisation is having clearly defined processes and policies and the executive
managers and board of directors who maintain the culture of compliance directly support
enhanced results. Thus, it is very important that all the board of directors participate in
compliance culture, make sure that clear lines of communication exist with management along
with rest of the company. Properly delineated processes and policies will help in encouraging
positive behaviour at workplace and the board of directors must be immediately responsive to
any kind of evidence that part of companies not participating. Effective governance highly
contributes in motivating the employees and encouraging effective culture and positive
behaviour within company. An effective and appropriate concern has been placed over culture
being a key causative aspect to the growth of a business. Maintaining transparency surrounding
fairness, accountability and operations, gives your employees a greater sense of responsibility
and awareness as to where they are positioned to create value within an organisation. Corporate
governance is widely effective and significant in providing a systematic way to the businesses in
attracting and retaining top talent at workplace
3. The impact of external and internal corporate governance mechanisms on performance of
businesses
As per the view point of Christiana Dharmastuti and Sugeng Wahyudi, (2013), the
mechanisms of corporate governance are categorised into two types - external and internal
governance mechanisms. The internal mechanism emphasis on ownership and control, board of
directors and managerial incentive mechanism. On the other hand, the external governance
mechanism emphasis on the issues associated with external market, regulations and laws. Both
these forces may limit the agency issues in corporation. The effectiveness and balance of the
mechanism of corporate governance can develop better financial performance of the corporate.
Dividend, as one among the financial performance measurement is a financial management
policy to accomplish corporate objectives. It is associated to corporate option to pay the pay-out
amount to stakeholders as well as its time frequency. Correct decision about dividend is
sometimes hard choice because of need towards balancing power of those individuals who
potentially can develop conflicts.
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PROPOSED METHODOLOGY
Research methodology includes some specific procedures or methods that help in performing
the study systematically. It includes various methods execution of which makes researcher able
to accomplish the aim of study in an effective way. The different methodologies used in the
study are as follows:
1. Research philosophy - among the two main philosophies utilised in the study, i.e.,
positivism and interpretivism, this study will make use of positivism philosophy as it is
based on factual knowledge and enable researcher to gather accurate data associated with
the study.
2. Research approach - two main approaches include inductive and deductive research
approach which researchers mainly utilised in the study. In this investigation, researcher
will make use of inductive approach as it is a qualitative method based approach that will
help researcher to draw a valid and reliable outcome.
3. Research design - from the qualitative and quantitative research designs, this study will
use qualitative research design as it is associated with non-numerical data and
information collection. By the assistance of this particular method, researcher is able to
gather accurate data so that more accurate outcomes can be drawn.
4. Research strategy - interviews, case study, action oriented research, quantitative survey,
systematic literature review etc. are the different research strategies among which the
researcher will use qualitative survey strategy. The main reason of utilising this strategy
is that it is used widely by researchers to gain affective outcomes of investigation.
5. Data collection method - data can be gathered by using secondary method. In this study,
researcher will use secondary method. By using secondary method, the second hand data
is collected by using articles, books and journals relevant to the study.
6. Research Timeline - The timeline associated with this study is provided below:
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Activ
ities
1st
week
(1st
April
2020
)
2nd
week
3rd
week
4th
week
5th
week
6th
week
7th
week
8th
week
9th
week
10th
week
11th
week
12th
week
13th
week
(30
June
2020)
Selec
tion
of
resea
rch
topic
Deve
lopin
g
aims
and
objec
tives
along
with
frami
ng
resea
rch
quest
ions
with
regar
d to
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topic
Draft
ing
resea
rch
prop
osal.
Perfo
rmin
g
litera
ture
revie
w
with
the
devel
opme
nt of
them
es.
Asse
ssme
nt
along
with
select
ion
of
resea
11

rch
meth
odolo
gy
Form
ing
quest
ionna
ire
consi
sting
of
both
close
ende
d and
open-
ende
d
quest
ions.
Colle
ction
of
data
throu
gh
quest
ionna
ire.
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Anal
ysing
the
colle
cted
data
Draw
ing
concl
usion
.
Reco
mme
nding
vario
us
strate
gies
for
resol
ving
issue
regar
ding
demo
tivati
on.
Arra
nging
repor
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t in a
struct
ured
mann
er.
Cons
ultati
on
with
tutor.
Perfo
rmin
g
modi
ficati
on if
any.
Final
subm
issio
n.
PROPOSED STRUCTURE OF THE STUDY
The proposed structure of this study are as follows:
1. Introduction
2. Literature Review
3. Research Methodology
4. Data analysis and Discussion of Findings
5. Conclusion
6. Recommendations
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7. Reflection
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REFERENCES
Books and Journals
Aguilera, R. V., Judge, W. Q., & Terjesen, S. A. (2018). Corporate governance
deviance. Academy of Management Review, 43(1), 87-109.
Bainbridge, S. M. (2017). Director primacy: The means and ends of corporate governance (pp.
251-310). Gower.
Black, B., De Carvalho, A. G., Khanna, V., Kim, W., & Yurtoglu, B. (2017). Corporate
governance indices and construct validity. Corporate Governance: An International
Review, 25(6), 397-410.
Choudhury, M. A., & Hoque, M. Z. (2019). Corporate Governance in Comparative Islamic
Perspective1. In Research in Corporate and Shari’ah Governance in the Muslim World:
Theory and Practice. Emerald Publishing Limited.
Dignam, A., & Galanis, M. (2016). The globalization of corporate governance. Routledge.
Du Plessis, J. J., Großfeld, B., Luttermann, C., Saenger, I., Sandrock, O., & Casper, M.
(2017). German corporate governance in international and European context (pp. 33-
34). Berlin, Heidelberg: Springer.
Foreman-Peck, J., & Hannah, L. (2016). UK corporate law and corporate governance before
1914: a re-interpretation. In Complexity and crisis in the financial system. Edward Elgar
Publishing.
Kraakman, R. H. (2017). The anatomy of corporate law: A comparative and functional
approach. Oxford University Press.
Moore, M., & Petrin, M. (2017). Corporate Governance: Law, Regulation and Theory.
Macmillan International Higher Education.
Pargendler, M. (2016). The corporate governance obsession. J. Corp. L., 42, 359.
Online
Corporate Governance Law, 2021. [Online]. Available through: <https://www.hg.org/corporate-
governance-law.html>
What is corporate governance?. 2021. [Online] Available Through:<
https://www.icaew.com/technical/corporate-governance/principles/principles-articles/
does-corporate-governance-matter#:~:text=Corporate%20governance%20is%20the
%20system%20by%20which%20companies%20are%20directed%20and
%20controlled.&text=The%20responsibilities%20of%20the%20board,to
%20shareholders%20on%20their%20stewardship.>.
Corporate Governance in Australia. 2021. [Online] Available Through:<
https://ecgi.global/content/corporate-governance-australia#:~:text=Corporate
%20governance%20in%20Australia%20is,governance%20framework%20are
%20outlined%20below.&text=Australian%20companies%20are%20established
%20under,Act%202001%20(Corporations%20Act). >.
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The Effectivity of Internal and External Corporate Governance Mechanisms Towards Corporate
Performance, 2013. [Online] Available Through:
<https://core.ac.uk/download/pdf/234629466.pdf>
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