Performance consequences of corporate governance changes

What is it about?

The paper develops a Ghanaian corporate governance index (GCGI) to measure corporate governance quality during the pre-code and the post-code sub-periods. The authors use a panel data analytical framework and fixed effects regressions to analyse the governance-performance relationships. The analysis shows evidence of a statistically significant increase in the degree of compliance with the Ghanaian Code from the pre-2003 sub-period to the post-2003 sub-period. The authors also find that the introduction of the code has led to improved firm performance. However, not all elements of corporate governance appear to have a significant effect on firm performance.

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Why is it important?

These results have important implications for both policy makers and companies. For policy makers, it is encouraging for the development of a code of corporate governance to regulate firms rather than enforcing rigid laws that may not be value relevant. For companies, the improvement in compliance with a code of corporate governance can provide a means of achieving improved performance.

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