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Corporate governance guidelines compliance and firm financial performance

Author

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  • Erick Rading Outa
  • Nelson M. Waweru

Abstract

Purpose - This paper aims to examine the impact of compliance with corporate governance (CG) guidelines during the period 2002-2014 on firm financial performance and firm value of Kenyan-listed companies. Design/methodology/approach - Using panel data of 520-firm year’s observations between 2005 and 2014, the authors test the hypothesis that compliance with CG guidelines issued in 2002 by Capital Markets Authority (CMA) improved firm financial performance and firm value. Findings - Compliance with CG Index which is an aggregate of all the CG guidelines is positively and significantly related to firm performance and firm value. Board evaluation is also positively and significantly related to firm performance. The findings suggest that CG guidelines are associated with firm financial performance and firm value. Originality/value - The authors provide evidence on the relationship between CG practices and firm financial performance and firm value in Kenya. Second, the authors provide evidence on board evaluation which has not been tested before in a “comply or explain” environment. Finally, they evaluate how CMA 2002 CG guidelines steered firm financial performance and firm value over its life cycle from 2002 to 2014. These results are important to CMA and other CG regulators and boards in their efforts to improve CG practices in the region.

Suggested Citation

  • Erick Rading Outa & Nelson M. Waweru, 2016. "Corporate governance guidelines compliance and firm financial performance," Managerial Auditing Journal, Emerald Group Publishing Limited, vol. 31(8/9), pages 891-914, September.
    • Handle: RePEc:eme:majpps:maj-12-2015-1291
    DOI: 10.1108/MAJ-12-2015-1291
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    Citations

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    Cited by:

    1. Ahmad Yuosef Alodat & Zalailah Salleh & Hafiza Aishah Hashim & Farizah Sulong, 2021. "Corporate governance and firm performance: empirical evidence from Jordan," Journal of Financial Reporting and Accounting, Emerald Group Publishing Limited, vol. 20(5), pages 866-896, August.

    More about this item

    Keywords

    Evaluation; Disclosure; Corporate governance; Kenya; Balance; Firm financial performance; F30; G15; G18; G30; K22; M41;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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