Corporate Governance Practices and Financial Performance of Firms Listed on the Zimbabwe Stock Exchange

International Journal of Research and Scientific Innovation (IJRSI) | Volume VII, Issue IX, September 2020 | ISSN 2321–2705

Corporate Governance Practices and Financial Performance of Firms Listed on the Zimbabwe Stock Exchange

Takuriramunashe, Famba^1*, Yusheng Kong², Ophias Kurauone⁴, Grace Chituku-Dzimiro^4
1,2School of Finance & Economics, 301 Xuefu Road, Zhenjiang, PRC2 Yusheng Kong, Jiangsu University, School of Finance & Economics, 301 Xuefu Road, Zhenjiang, PRC,
³Ophias Kurauone, School of Finance & Economics, 301 Xuefu Road, Zhenjiang, PRC,
⁴Grace Chituku-Dzimiro, Chinhoyi University of Technology, Department of Accounting & Finance, Chinhoyi, Zimbabwe
*Corresponding Author

Abstract: Purpose: This study examines how corporate governance practices influence performance of firms listed on the Zimbabwe Stock Exchange.
Design/methodology/approach: The fixed effects (FE) model is estimated on a panel of 29 non-financial firms listed on the Zimbabwe Stock Exchange for the period between 2010 and 2016. Firm performance was measured using dependent variables return on assets (ROA) and return on equity (ROE) calculated from the firms’ financial reports available online. The panel data include fixed effects (FE) and random effects (RE) estimators. The Hausman test framework is used to select the most efficient and consistent alternative.
Findings: The study finds evidence to support the need for good corporate governance practices in Zimbabwe. Board independence and board gender diversity were found to have a significant positive relationship with ROA. The study further finds a positive significant relationship between board independence, board gender diversity, board size and ROE.
Originality/value: Although many previous studies have studied this relationship, the current study is the first to investigate the impact of good corporate governance practices with a specific focus on the Zimbabwe stock exchange.

Key words: ‘Corporate Governance Practices’, ‘Firm Performance’, ‘Board Independence’, ‘Zimbabwe Stock Exchange’, ‘Fixed Effects Model’

I. INTRODUCTION

The corporate governance subject has aroused significant research interest around the world in the past few decades fueled by dramatic corporate scandals and crisis such as the massive bankruptcies of Enron, WorldCom (Deloitte , 2016; Zabri, Ahmad, & Wah, 2016; Fratini & Tettamanzi, 2015). The aftermath of these scandals on both the economic and social front (Fratini & Tettamanzi, 2015) and the financial crises arising from the capital crisis in the United States of America and the Sovereign Funds crisis in the European Union (IODSA, 2016; Villanueva-Villar, Rivo-Lopez, & Lago-Penas, 2016) are among the most significant drivers to serious investment in corporate governance issues around the globe.

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