Examining The Impact Of Corporate Governance On Firm Performance In South Africa:the Effects Of Board Roles And Corporate Governance Reforms

This thesis examines the impact of corporate governance reforms(the King Ⅲ CG code of South Africa)on board structural characteristics,board roles and firm performance.The associated research questions are:1)how and which board roles mediate the relationship between board structural characteristics and firm performance?2)and what is the influence of corporate governance reforms on this relationship?Based upon the existing literature,a model has been developed that relates board structural characteristics(non-executive directors,CEO Duality,Diligence and Independence of Audit Committee)with firm performance(ROA,Tobin Q)through intervening variables of dual board roles,namely board monitoring role(Frequency of board meetings)and board resource dependence role(Board size)via multitheoretic approach.This thesis uses an exclusive balanced panel data set of 278 listed companies on the Johannesburg Stock Exchange(JSE)to examine the impact of CG code on the model for the two equal time periods.The first panel comprises of the data for the years from 2002-2010 which is the period before the implementation of the CG code and the second panel comprises of data for the years from 2011-2019.The data set straddles the year 2010 which is the year when the King Ⅲ CG code was implemented.The research adds to the limited empirical literature on boards by using data from South Africa and a multi-theoretic approach to advance some understanding that if the board’s monitoring and resource provision roles are strengthened through board restructuring,the firm’s performance(Tobin Q)improves.However,the study’s key findings show that in the post-CG code period,the mediated association between board structural characteristics and firm performance is higher.The study also found that firm value(Tobin Q)grew after the adoption of the King Ⅲ CG code;nevertheless,the installation of the King Ⅲ CG code did not result in any rise in company profitability(ROA).The results appear robust after various sensitivity analyses using ROE in place of Tobin Q,including endogeneity tests using the two-step system GMM.This research has far-reaching policy implications.It proposes the formation of an independent nominating committee on the board of directors,as well as a performance evaluation standard for board members.The study concludes that overall companies adopted the approach spelt out in the CG code for reporting corporate governance.Finally,the report indicates that the KingⅢ CG code was groundbreaking in terms of corporate governance,and that the country’s corporate governance image in the country embraced the global calls for the reforms.