A Review of the Relationship between Corporate Governance and Organizational Performance through Systems Thinking

Isaac Jerry Kwabena Asare, Yusheng Kong, Mark Yama Jnr Tampuri, Joseph Owusu-Marfo, Emmanuel Boadi Bosompem

Abstract


There seems to be divergent views on the relationship between corporate governance and organizational performance. These views seem to be inconsistent and inconclusive according to some researchers. Why are the views not convincing? What are the possible causes of the inconsistency? Reviewing relevant literature, it was gathered that various studies approached the subject through different individual attributes of corporate governance with different methodologies in different situations. The works show impact-degree-relationship or directional-relationship or no relationship. It was also found that researchers hardly considered environmental factors in the governance-performance relationship discourse. The study therefore proposes the application of systems thinking perspectives for future studies on the subject. This study corroborates the claim that there exist a relationship between corporate governance and organizational performance. It identifies the lack of standard elements for measuring corporate governance as the possible cause of the inconsistency. Contributing, the study attempted to classify the conclusions of identified works into three assertions to buttress the argument in favor of governance and performance relationship. The study suggests that policy makers and practitioners should take keen interest in not only board attributes but other factors within the organizational environment to identify, analyze, appreciate and address all possible challenges.


Full Text:

PDF

References


J. M. Howell and K. E. Hall-Merenda, “The ties that bind: The impact of leader-member exchange, transformational and transactional leadership, and distance on predicting follower performance.,” J. Appl. Psychol., vol. 84, no. 5, p. 680, 1999.

Y. Liu, Z. Wei, and F. Xie, “Do women directors improve firm performance in China?,” J. Corp. Financ., vol. 28, pp. 169–184, 2014.

F. Battaglia and A. Gallo, “Strong boards, ownership concentration and EU banks’ systemic risk-taking: Evidence from the financial crisis,” J. Int. Financ. Mark. Institutions Money, vol. 46, pp. 128–146, 2017.

C. H. Ponnu, “Corporate Governance Structures and the Performance of Malaysian Public Listed Companies,” Int. Rev. Bus. Res. Pap., vol. 4, no. 2, pp. 217–230, 2008.

L. Heracleous, “What is the Impact of Corporate Governance on Organisational Performance ?*,” in What is the Impact of Corporate Governance on Organisational Performance ?*, 2001, vol. 9, no. 3, pp. 165–173.

Y. Liu, M. K. Miletkov, Z. Wei, and T. Yang, “Board independence and firm performance in China,” J. Corp. Financ., vol. 30, pp. 223–244, 2015.

D. Proudfoot et al., “Board Member,” Res. Organ. Behav., vol. 34, no. 1, pp. 683–695, 2016.

O. J. Suberu and O. S. Aremu, “Corporate Governance and Merger Activity in the Nigerian Banking Industry,” J Econ., vol. 1, no. 2, pp. 91–97, 2010.

C. Coglianese, T. J. Healey, E. K. Keating, and M. L. Michael, “The role of government in corporate governance,” New York Univ. J. Law Bus., vol. 219, 2004.

H. I. Ibrahim and A. H. Zulkafli, “Corporate governance, HRM practices and organizational performance,” Socio-Economic Probl. State, vol. 14, no. 1, pp. 30–40, 2016.

G. B. Mbu-ogar, S. A. Effiong, and J. O. Abang, “Corporate Governance and Organizational Performance : Evidence from the Nigerian Manufacturing Industry,” IOSR J. Bus. Manag., vol. 19, no. 8, pp. 46–51, 2017.

J.-Y. Chen, J.-C., Silverthorne, C., & Hung, “Organization communication, job stress, organizational commitment, and job performance of accounting professionals in Taiwan and America.,” Leadersh. Organ. Dev. J., vol. 27, no. 4, p. 242–249., 2006.

J. Altmann, L. Cariño, R. Flaman, M. Kulessa, and I. Shulz, “The UNDP Role in Decentralization and Local Governance-A Joint UNDP Government of Germany Evaluation,” United Nations Dev. Program. New York, 2000.

M. P. Garcia, “Organizational Conflict and Organizational Performance,” pp. 41–45, 2013.

D. L. Cohen, A. R., & Bradford, “The influence model: Using reciprocity and Economics and Education exchange to get what you need.,” J. Organ. Excell., vol. 25, no. 1, pp. 57–80, 2005.

T. E. Bolman, L. G., & Deal, Reframing organizations: Artistry, choice, and leadership. 2003.

C. C. DeClerk, “The relationship between retail store manager leadership styles and employee generational cohort, performance and satisfaction.,” Univ. PHOENIX, 2008.

G. F. Scott, W. R., & Davis, “Organizations and organizing: Rational, natural and open systems perspectives.,” Routledge, 2015.

et al. Cutler, N. S., Graves-Deal, R., LaFleur, B. J., Gao, Z., Boman, B. M., Whitehead, R. H., “Stromal production of prostacyclin confers an antiapoptotic effect to colonic epithelial cells.,” Cancer Res., vol. 63, no. 6, pp. 1748–1751, 2003.

D. Agle, B. R., Nagarajan, N. J., Sonnenfeld, J. A., & Srinivasan, “Does CEO charisma matter? An empirical analysis of the relationships among organizational performance, environmental uncertainty, and top management team perceptions of CEO charisma.,” Acad. Manag. J., vol. 49, no. 1, pp. 161–174, 2006.

A. V. Cameron, K. S., Quinn, R. E., DeGraff, J., & Thakor, “Competing values leadership,” Edward Elgar Publ., 2014.

B. K. Agyei-Mensah, “Internal Control Information Disclosure and Corporate Governance: evidence from an Emerging Market,” Corp. Gov., 2016.

X. Liu and C. Zhang, “Corporate governance, social responsibility information disclosure, and enterprise value in China,” J. Clean. Prod., vol. 142, pp. 1075–1084, 2017.

M. Becht, P. Bolton, and A. A. Röell, “Corporate Governance and Control,” SSRN Electron. J., 2002.

R. & I. K. Tomlinson, “Rethinking the Process of Operational Research and Systems Analysis,” J. Corp. Financ., vol. 28, no. 1, pp. 2002–2006, 2014.

J. W. Muriuki, “Influence of Corporate Governance on Organizational Performance of State Corporations in Kenya,” Sci. J. Bus. Manag., vol. 5, no. 4, p. 136, 2017.

O. S. Adebayo, A. G. Olusola, and O. F. Abiodun, “Relationship Between Corporate Governance And Organizational Performance : Nigerian Listed Organizations Experience .,” Int. J. Bus. Manag. Invent., vol. 2, no. 9, pp. 1–6, 2013.

H. W. Tang and C. C. Chang, “Does corporate governance affect the relationship between earnings management and firm performance? An endogenous switching regression model,” Rev. Quant. Financ. Account., vol. 45, no. 1, pp. 33–58, 2015.

B. Plc and E. State, “Effect of Corporate Governance on Organizational Performance : A Case Study of Nigeria,” no. 11, pp. 1–21, 2016.

R. V. Aguilera and G. Jackson, “Comparative and International Corporate Governance,” Acad. Manag. Ann., vol. 4, no. 1, pp. 485–556, 2010.

C. Rose, “Firm performance and comply or explain disclosure in corporate governance,” Eur. Manag. J., vol. 34, no. 3, 2016.

C. Rose, “Firm performance and comply or explain disclosure in corporate governance,” Eur. Manag. J., vol. 34, no. 3, pp. 202–222, 2016.

B. Marie L’Huillier, “What does ‘corporate governance’ actually mean?,” Corp. Gov., vol. 14, no. 3, pp. 300–319, 2014.

H. Abdallah, B. Valentine, H. Abdullah, and B. Valentine, “Fundamental and Ethics Theories of Corporate Governance,” Middle East. Financ. Econ., vol. 4, no. 4, pp. 88–96, 2009.

O. S. Agyemang, E. Aboagye, and O. Y. A. Ahali, “Prospects and Challenges of Corporate Governance in Ghana,” Int. J. Sci. Res. Publ., vol. 3, no. 5, pp. 1–9, 2013.

W. Fauziah, W. Yusoff, and I. A. Alhaji, “Insight of Corporate Governance Theories,” J. Bus. Manag., vol. 1, no. 1, pp. 52–63, 2012.

D. Wagana and K. Karanja, “The influence of Corporate Governance on Corporate Performance Among Manufacturing Firms in Kenya: A Theoretical Model,” Int. J. Acad. Res. Bus. Soc. Sci., vol. 5, no. 4, pp. 258–272, 2015.

W. Ben-Amar, C. Francoeur, T. Hafsi, and R. Labelle, “What Makes Better Boards? A Closer Look at Diversity and Ownership,” Br. J. Manag., vol. 24, no. 1, pp. 85–101, 2013.

K. Tornyeva and T. Wereko, “Corporate Governance and Firm Performance : Evidence from the Insurance Sector of Ghana,” Eur. J. Bus. Manag., vol. 4, no. 13, pp. 95–113, 2012.

B. Joe, D. Ii, and K. Kankpang, “Linking Corporate Governance with Organizational Performance: New Insights and Evidence from Nigeria,” Glob. J. Manag. Bus. Res., vol. 11, no. 12, pp. 1–13, 2011.

G. Coffey, A Systems Approach to Leadership. 2010.

A. Buallay, A. Hamdan, and Q. Zureigat, “Corporate Governance and Firm Performance: Evidence from Saudi Arabia,” Australas. Accounting, Bus. Financ. J., vol. 11, no. 1, pp. 78–98, 2017.

S. Ahmad and R. Omar, “Basic corporate governance models: a systematic review,” International Journal of Law and Management, vol. 58, no. 1. pp. 73–107, 2016.

E. Wim and P. Leen, “Good Governance driving Corporate Performance? A meta-analysis of academic research & invitation to engage in the dialogue,” 2016.

L. Brown and M. Caylor, “Corporate governance and firm performance,” Available SSRN 586423, 2004.

M. Rodriguez-Fernandez, “Social responsibility and financial performance: The role of good corporate governance,” BRQ Bus. Res. Q., vol. 19, no. 2, 2016.

A. Zagorchev and L. Gao, “Corporate governance and performance of financial institutions,” J. Econ. Bus., vol. 82, pp. 17–41, 2015.

S. P. Sharif and M. Ming Lai, “The effects of corporate disclosure practices on firm performance, risk and dividend policy,” Int. J. Discl. Gov., vol. 12, no. 4, pp. 311–326, 2015.

A. . O. . Adebayo , Mudashiru Ibrahim, “Good Corporate Governance and Organisational Performance : An Empirical Analysis,” Int. J. Humanit. Soc. Sci., vol. 4, no. 7, pp. 170–178, 2014.

T. Yoshikawa, H. Zhu, and P. Wang, “National governance system, corporate ownership, and roles of outside directors: A corporate governance bundle perspective,” Corp. Gov. An Int. Rev., vol. 22, no. 3, 2014.

H. Q. Kieu, “Leadership Styles and Organizational Performance: A Predictive Analysis,” ERIC, 2010.

D. I. Avolio, B. J., Bass, B. M., & Jung, “Reexamining the components of transformational and transactional leadership using the Multifactor Leadership.,” J. Occup. Organ. Psychol., vol. 72, no. 4, p. 441–462., 1999.

E. A. Kirkpatrick, S. A., & Locke, “Direct and indirect effects of three core charismatic leadership components on performance and attitudes,” J. Appl. Psychol., vol. 81, no. 1, p. 36, 1996.

Y. Bass, B. M., Avolio, B. J., Jung, D. I., & Berson, “Predicting unit performance by assessing transformational and transactional leadership.,” J. Appl. Psychol., vol. 88, no. 2, p. 207, 2003.

J. J. Jung, D. I., & Sosik, “Transformational leadership in work groups the role of empowerment, cohesiveness, and collective-efficacy on perceived group performance.,” Small Gr. Res., vol. 33, no. 3, p. 313–336., 2002.

K. Walumbwa, F. O., Lawler, J. J., Avolio, B. J., Wang, P., & Shi, “Transformational leadership and work-related attitudes: The moderating effects of collective and self-efficacy across cultures.,” J. Leadersh. Organ. Stud., vol. 11, no. 3, pp. 2–16, 2005.

B. S. Black, W. Kim, H. Jang, and K. S. Park, “How corporate governance affect firm value? Evidence on a self-dealing channel from a natural experiment in Korea,” J. Bank. Financ., vol. 51, pp. 131–150, 2015.

J. Jermias and L. Gani, “The impact of board capital and board characteristics on firm performance,” Br. Account. Rev., vol. 46, no. 2, pp. 135–153, 2014.

R. V Aguilera and R. Crespi-cladera, “Global corporate governance : On the relevance of firms ’ ownership structure,” J. World Bus., vol. 51, no. 1, pp. 50–57, 2016.


Refbacks

  • There are currently no refbacks.