International Journal of Management and Commerce Innovations ISSN 2348-7585 (Online) Vol. 7, Issue 2, pp: (1398-1407), Month: October 2019 - March 2020, Available at: www.researchpublish.com
CORPORATE GOVERNANCE, FIRM PERFORMANCE AND FIRM VALUE OF FIRMS LISTED IN NAIROBI STOCK EXCHANGE: A REVIEW OF EXISTING EMPIRICAL EVIDENCE 1
Jastan Iminyi, 2Dr. Willis Otuya (PhD)
1
PhD Student, Masinde Muliro University of Science and Technology, Kakamega, Kenya
2
Senior Lecturer, Masinde Muliro University of Science and Technology, Kakamega, Kenya
Abstract: This paper aims to revisit the link between corporate governance, firm value, and firm performance by focusing on convergence, understood as the way that listed firms are adopting best practice in terms of corporate governance and the implications of this adoption not only in regard to firm performance but also firm value. A desktop review specifically, Systematic review was utilized. The study focused on listed firms both locally and internationally. We examine theoretical, conceptual and empirical review with an aim of unearthing nexus among these concepts from existing studies. We contribute to the empirical literature by using various studies to show how these concepts relate to each other. There is significant relationship between corporate governance and financial performance. Similarly, there is significant relationship between corporate governance and firm value. However, there were studies that examined nexus of firm value, financial performance and corporate governance. The study adds on the existing debate and widens stock of literature relating to roles of corporate governance in enhancing firm performance and maximizing firms’ value. It is substantially of essential policy makers, practitioners, to investors and other stakeholders who are interested with firm’s value in particular. Keywords: Corporate Governance, Firm Performance, Firm Value, Listed Firms.
I. INTRODUCTION Even though relationship between corporate governance and firm performance has continued to attract attention of scholars, policy and practitioners both in developed and emerging markets, the emergency of firm value among listed firms has given corporate governance new dimension. The mechanism of GCG is become one way to reduce control and ownership problems as it is also related to the increase of firm performance that will result in the increase of firm value. Companies that score high in corporate governance measurements tend to outperform other companies with lower scores (Adams, Hermalin and Weisbach, 2010). The increase in enterprise value is usually marked by the rise of stock prices in the market, as the stock market price of the company reflects the overall investor's valuation for each equity owned by the company. Corporate governance refers to the procedures and processes according to which an organisation is directed and controlled (Organisation for Economic Co-operation and Development [OECD], 2015). Following the collapse of the Enron Corporation in the United States, in 2001, corporate governance has continuously become a topic of discussion not only in financial markets but in academia as well. Consequently, the corporate governance debate has increasingly attracted great interest from both academic scholars and practitioners across the globe (Ammann, Oesch & Schmid, 2011). In addition, Claessens and Yurtoglu (2013) concur that this lively debate has dominated discussions in corporate boardrooms, academic meetings, as well as policy circles around the world. Furthermore, Bebchuk and Weisback (2010) agree that
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