Academy of Accounting and Financial Studies Journal (Print ISSN: 1096-3685; Online ISSN: 1528-2635)


Corporate Governance Quality and Financial Performance of Retail Firms: Evidence Using South African Data

Author(s): Shaa'ista Mukaddam, Athenia Sibindi

A great deal has been written about corporate governance over the last few decades. Notwithstanding, in the wake of the re-emergence of corporate scandals, environmental sustainability concerns and globalisation of firms, have necessitated that further research be conducted on the corporate governance practices of firms. Against this backdrop the primary aim of this paper is to determine if the corporate governance practices of retail firms in South Africa have an impact on their financial performance. The choice of the retail industry in South Africa as a unit of analysis was motivated by virtue of the fact that the wholesale and retail sector accounts for a large portion of South Africa’s Gross Domestic Product. The study employed a panel of 18 South African firms in the wholesale and retail sector for the period ranging from 2010 to 2019. Panel data techniques, namely the pooled ordinary least squares (POLS), fixed effects (FE) and random effects (RE) models were estimated. The study documented that board size were negatively related to financial performance. In addition, the study found that board independence and firm size were positively related to financial performance. Overall, the relationship between corporate governance and financial performance is not very strong among retail firms in South Africa. This could be due to firms not following the guidelines and regulations very strictly during the sample period.

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