The impact of corporate governance mechanisms on firm performance

Abstract

This article studies the field of corporate governance and explorers its impact on firm performance, which is one of the most arguable subjects in the literature. The objective of this paper is to shed light on different perspectives regarding cooperate governance mechanisms by reviewing the most recent studies in this field and to explorer its impact on firm performance. This paper has reviewed theoretical framework such as agency theory and stewardship theory which proposed by academics, as well as 13 empirical studies. The review found that strong and effective corporate governance is necessary to keep firm performance stays in improving trend, especially some important mechanisms such as (manager behaviour, ownership structure, and board of director diversity in regards of gender). This paper contributed to the literature by providing an argument from variety point of views achieving different results, which can be understood that there is no a common agreement regarding the effect of such mechanisms on performance. Hence, it provides the need of more explorations in this field as the complexity of the relationship. This paper suggests that despite the existence many researches in this field exploring the importance of corporate governance, the need of additional studies required to be conducted testing a wider range of firms with different economic situation.