The Impact of Corporate Governance on Firm Performance in Mauritius

935 Words May 23rd, 2010 4 Pages
Introduction

Corporate governance is a field in economics that investigates how to secure/motivate efficient management of corporations by the use of incentive mechanisms, such as contracts, organizational designs and legislation. This is often limited to the question of improving financial performance, for example, how the corporate owners can secure/motivate that the corporate managers will deliver a competitive rate of return. (Mathiesen, 2002). Another definition is "Corporate Governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The corporate governance framework is there to encourage the efficient use of resources and equally to require accountability
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Chhaochharia and Grinstein (2007) looked at the impact of the 2002 governance rules established by the Sarbanes-Oxley Act on firm value. They found that less compliant firms earn positive abnormal returns compared to more compliant firms. They also found that less compliant large firms earn positive abnormal returns but less compliant small firms earn negative abnormal returns.

Bhagat and Bolton (2008) examined the relationship between corporate governance and performance, and found that better corporate governance, board members’ stock ownership, and CEO-Chair separation are positively related to operating performance. They also found that the probability of management turnover is positively related to board members’ stock ownership and board independence when firms perform poorly.

Patibandla (2006) examined the ownership structure and firm performance on Indian firms by separating large investors into private foreignin stitutional investors and government-owned local financial institutions. Patibandla found a positive relationship between private foreign institutional investors and firm profitability and a negative relationship between government-owned local financial institutions and firm profitability.

Aims & Objectives of Research

The aim of this investigation is to make a research on the impact of corporate governance on the performance of firms in Mauritius. The research is going to see the
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