Content area
Full Text
Abstract
The current study aims to design a research framework for investigating the effect of corporate governance on financial performance of listed companies in an emerging economy, Vietnam, from 2019-2022. Annual reports, financial statements, and corporate governance disclosures of listed firms will be gathered. Panel data regression analysis will be done to examine the impacts of overall corporate governance quality as well as specific mechanisms including board structure, ownership structure, and transparency on financial performance measured by Return on Assets, Return on Equity, and Tobin's Q. Control variables such as firm size, leverage, and growth will also be taken into consideration.
Introduction
Background of The Study
Corporate governance plays a vital role in promoting accountability, transparency and sustainable growth of modern corporations. Adopting strong governance standards helps firms establish trust among stakeholders, access capital funding, and support long-term success (OECD, 2015). Both mandatory regulations and voluntary practices shape how companies arc directed and controlled. Extensive research shows that the overall quality of corporate governance significantly influences financial performance and valuation of companies (Bhagat & Bolton, 2019). The study focuses on analyzing corporate governance systems and their connections to financial results of listed firms in Vietnam.
Corporate governance (CG) refers to the rules, practices and processes by which a company is executed and managed. Good CG ensures that companies operate efficiently and effectively and maximize shareholder value (Alodat et al., 2022). Critical economic arguments for good CG include increased investment and financial performance and reduced agency costs and risks.
One important channel through which CG affects economic outcomes is the alignment of incentives between shareholders and managers. This alignment can be achieved through mechanisms such as performance-based pay and independent directors on boards (Nguyen ct al., 2014). Another means is to provide reliable and transparent financial reporting, which can reduce information asymmetries between managers and investors (Samaha et al., 2015). Farooq et al. (2021) examine the relationship between governance indicators like board size, independent directors and audit committee size with financial performance of Pakistani listed firms. They find board independence has a significant positive impact on performance.
Despite the clear benefits associated with good CG, there arc still challenges in implementing effective governance practices. These challenges include issues such as the concentration of ownership, conflicts...