Exploring the interplay between corporate governance and business performance: A review of literature

Abstract

This literature review examines the relationship between corporate governance and business performance by synthesizing the findings of 20 recent empirical studies released between 2020 and 2024. The review highlights a robust relationship between corporate governance mechanisms and firm performance; however, the strength and type of this interaction are context-, mechanism-, and measure-dependent. The expected governance mechanisms analyzed are board structure (size, independence, and composition), CEO duality, audit committee characteristics, ownership structure (insider holding percentage), and frequency of meetings. The findings reveal that board independence is positively related to performance, while higher ownership concentration and greater frequency of board meetings have positive impacts on firm performance. In contrast, excessive board size diminishes performance, and duality (the same person serving as both CEO and chairman) negatively relates to performance. The corporate governance and performance association is, nonetheless, moderated by factors including firm size, financial distress sector particulars, and geographical context. Our findings are important and have valuable implications for corporate policymakers, regulators, and investors looking to tailor governance mechanisms that enhance organizational effectiveness.