Revisiting the interconnection between governance mechanisms and firm performance: evidence from Vietnamese listed firms

Abstract

Purpose Corporate governance plays a critical role in solving agency problems. However, previous findings on how governance mechanisms lead to high firm performance are inconclusive. Additionally, this relationship has not been well addressed in the context of transitional countries where governance systems and mechanisms are weak, leaving a gap for research. Hence, this study aims to shed light on the effects of four key governance components, namely, ownership concentration, chief executive officer duality, board size and gender diversity, on firm performance. Design/methodology/approach This study reports on the econometric panel data analysis and fuzzy-set qualitative comparative analysis (fsQCA) of 1,424 firm-year observations from listed companies in Vietnam covering the period of 2010–2017. Findings The econometric panel data analysis confirmed the net effects of single solitary governance components. FsQCA revealed equifinal configurations of components that explain high firm market- and accounting-based performance. Practical implications These findings are relevant for firms in transitional and emerging markets, aiming to adopt the most suitable internal mechanisms to pursue their performance objectives and for regulators interested in enhancing the advantages of the capital market. Originality/value This study provides empirical evidence that firm performance can be improved when the appropriate corporate governance mechanisms are selected. As there are equifinal paths leading to the desired outcome of high performance, firms from different industrial and national contexts should mindfully apply any uniform corporate governance code.