The Effect of Internal Corporate Governance Mechanisms on Corporate Performance

Abstract

The purpose of this paper is to explore effect of internal corporate governance mechanisms on company performance. Whether a good corporate governance causes higher firm performance is still a valid research question for reasons like ambiguity regarding the direction of causality. An empirical study was conducted in studying the effect of different of corporate governance internal mechanisms on corporate performance. The result of showed that internal corporate governance mechanism represented by Ownership Structure, Board of Directors, Management Remuneration, Internal Control & Audit and Transparency & Disclosure have a great effect on corporate performance. The corporate performance evaluation criteria’s used in this study: Financial Viability, Corporate Growth, Effectiveness, Efficiency, and Risk Reduction are affected by Internal corporate governance mechanisms. The study reveals also that corporate governance affects highly company performance in the medium to long term runs but in the short term performance does not necessarily depend on governance.