Empirical Literature Review On Corporate Governance

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2.4 Empirical Literature Review 2.4.1 Corporate Governance and Firms Performance The argument of Berle and Means (1932) on corporate governance formed the foundation for further studies by various researchers on the trend of corporate governance. Their study revealed the possibility of creating a separation of control between the mangers who run the large size corporations and the owners who are the provider of capital. This observation of a departure and separation of ownership and control gave rise to a situation where emphasis is now focusing on the behavioural aspect and topical theory of the firm. Kajola (2009) examined corporate governance and firm performance in Nigeria The result reveals that there is a significant relationship between Return on Equity (ROE) and board size as well as chief executive status. The study further reveals a positive significant association between Profit Margin (PM) and chief executive. Weisbach (1988), Heranlin and Weisbach (1991) examine agency theory and corporate governance .They observed that there is a positives relationship between firm performance and the proportion of outside directors sitting on the board. However, in the works of Forberg (1989), Weisbach (1991), Bhagat and Black (2002) and Sanda…show more content…
(2000) was able to conclude that Independence together with activity of the Audit Committee is associated with a lower incidence of AAER For control variables, growth of company or the CEO as Chair of the Board resulted in a greater incidence of fraud. Klein (2002b) report of studies carried out on corporate governance mechanism and abnormal accrual in the books established negative relationship between board/audit committee independence and abnormal accruals. No evidence between having all independent audit committee and abnormal accruals. Changes from majority independent boards and/or audit committees result in as significant increase in abnormal accruals. Percentage of CEO holdings is not
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