"Impact of Corporate Governance on American Corporates' Financial Performance: The Mediating Role of Derivatives "

Abstract

INTRODUCTION Salman Bahoo1 Farhan Ahmed2 Ayesha Shoukat3 Mumtaz Ahmad4 1,3,4Department of Commerce, The Islamia University Bahawalpur – Pakistan Email: agm.ird@yahoo.com 2Department of Economics & Management Sciences, NED University of Engineering & Technology, Karachi Pakistan Significant foreign direct investment through multinational corporates is a result of the globalization. Corporates are key players around the world and deal with several countries and currencies. The strong corporate governance and risk management mechanism is essential for national and multinational corporates to survive and improve financial performance (Prevost, Rose, & Miller, 2000). The corporate governance has gain attention after considerable losses to big corporates such as Enron, Harris Scarfe, One. Tel, WorldCom, and Andersen. In the United States of America, the corporate governance became famous after the scandal of Watergate (the 1970s). As a result, the Sarbanes –Oxley Act 2002 and Dodd-Frank Act 2010 is passed in the US. The association between the corporate governance and corporates financial performance is studied by several researchers (Jiang & Zhang, 2018; Nawaz & Ahmad, 2017; Paniagua, Rivelles, & Sapena, 2018; Yilmaz, 2018; Shahwan, 2015). Most researchers found that corporate governance is essential and impacts positively towards the financial performance of the national and multinational corporates. Further, the multinational corporates face a different type of risk, such as commodity prices, foreign currency, and interest rate risk while doing operations around the world. It is essential for the multinational corporates to have a sound risk management system to overcome these risks. The derivatives have a positive impact on financial performance (Erez-gonz, 2013; Donohoe, 2015; Kim, Papanastassiou, & Nguyen, 2017; Bae, Kim, & Kwon, 2018; Bahoo,