Corporate Governance and Share Holders Value

Abstract

The relationship between corporate governance and firms‟ performance is not a new phenomenon. Many researches were previously carried out with divergent findings. The performance measures used in those researches were the traditional accounting based performance measures which have been heavily criticized due to the fact that they fail to account for the cost of equity and debt which determines a firm‟s true value. This study adopted the value based performance measures, Economic Value Added (EVA) and Market Value Added (MVA), to proxy firm performance for the period of the study, using data from 27 listed firms on the Ghana Stock Exchange (GSE) covering the period 2007 – 2014. The study examined the effect of corporate governance variables on shareholders‟ value using the GLS model and employing the Hausman test to determine the appropriate models to use (random or fixed). The study found that CEO duality had a negative relationship with MVA and was significant but had a positive effect on EVA. CEO tenure had an inverse relation with both MVA and EVA, while board size had a positive nexus with EVA. The study concludes that characteristics of corporate governance that influence firm level performance are CEO tenure, Board Size and Overhead costs whiles CEO duality, CEO tenure and Board size affect market level performance. The implication is that a CEO doubling as chairperson is good for the additional value creation at the market level whiles providing incentives to CEOs (Overhead cost) has greater impact on improving firm level performance. Moreover, for enhanced output of corporate organizations, the duration of CEO tenure of office must be reduced and a considerable board size with adequate skills and expertise be maintained.