The Journal of Accounting and Management, Vol 2, No 3 (2012)

Effects of corporate governance practices on firm performance



Corporate governance is mainly focused on ensuring that managers act in shareholders'interest. Therefore, this concept has emerged as essential to minimize conflicts in the company and todiscourage managers to take leverage decisions that enhance their own benefits, to the detriment ofshareholders. The degree to which managers can deviate from optimal behavior critically depends onthe strength of corporate governance. Therefore, one can hypothesize that there must be a relationshipbetween leverage financial performance of the enterprise and corporate governance quality. The aimof this paper is precisely to test this hypothesis and support the idea that firms with better governancesystem are more profitable and with a higher market value. It is also concerned the link betweenbusiness results, quality of governance, costs of accumulating experience by managers and thereforethe degree of performance and market value.


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