Journal
CORPORATE GOVERNANCE-THE INTERNATIONAL JOURNAL OF BUSINESS IN SOCIETY
Volume 18, Issue 3, Pages 462-477Publisher
EMERALD GROUP PUBLISHING LTD
DOI: 10.1108/CG-01-2017-0011
Keywords
Financial performance; Corporate governance; Board of directors; Financial reporting
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Purpose The purpose of this paper is to analyze the effect of corporate governance practices on firms' financial performance, as measured by comprehensive income (CI). Design/methodology/approach Using a sample of 237 firms from the Standards & Poor (S&P) 500 index during the years 2004-2009, multivariate statistical analyses are conducted to confirm the authors' main hypothesis. Findings The results indicate that having high levels of corporate governance culture has a positive impact on a measure of firms' financial performance, namely, CI. Furthermore, they indicate a positive correlation between a higher percentage of external directors and financial performance, and a negative relationship between number of board meetings and financial performance. Originality/value The main contribution of this research is that good corporate governance strategies deliver superior financial performance for businesses in terms of CI. This serves as a method of value creation, which is the ultimate goal of a business. In addition to the use of CI as an indicator of financial performance, a unique measure of corporate governance level is tested.
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