The Relationship Between Corporate Governance And Performance Of The Firm

1994 Words Dec 4th, 2014 8 Pages
1. This article focuses on the Gompers, Ishii, and Metrick (GIM, 2003) study which found that strong shareholder rights lead to higher stock price returns and thus value. This is a great indicator that good governance has a direct effect on the performance of the firm. The article finds that corporate governance has a positive impact on the firm / management / shareholders. However good governance is not always the correct metric of evaluation for firms and boards. The primary finding of the article is from an economic analysis defending the relation between corporate governance and performance. This article examines the relationships among corporate governance / corporate performance / capital structure / and corporate ownership structure. Many of the past studies have taken into consideration only one measure of governance, while this study focused on seven different governance measures. The article also looks at the performance of a firm and the relationship it has with management turnover or disciplinary actions required.
2. This article examines Swiss companies in relation to how board size affects the value of a firm. The study did not find significant correlation between board size having a negative impact on firm value or profitability; this is contrary to many previous studies ( e.g. Yermack, 1996). This article argues against the findings of Jensen (1993) and Lipton and Lorsch (1992), which stated that larger boards have a negative effect on firm value; in fact…
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