Corporate Governance and Performance: A Critical Review of Contemporary Practices

Abstract

Corporate governance has attracted sustained scholarly and practical attention due to its perceived role in enhancing organizational accountability, transparency, and performance. Repeated corporate failures and global financial crises have intensified debates regarding the effectiveness of contemporary governance mechanisms and their capacity to safeguard stakeholder interests while promoting long-term value creation. This review critically examines the relationship between corporate governance and firm performance by synthesizing theoretical perspectives, regulatory developments, and empirical evidence from prior studies. Drawing on agency theory, stewardship theory, resource dependence theory, and stakeholder theory, the paper highlights the evolution of governance from a narrow shareholder-centric model toward a broader, multidimensional framework that integrates sustainability, ethical oversight, and strategic guidance. The review reveals that while sound governance practices are generally associated with improved financial and non-financial performance, this relationship is highly contingent on institutional environments, ownership structures, firm characteristics, and measurement approaches. The analysis further underscores emerging governance challenges related to executive compensation, shareholder activism, regulatory compliance, technological transformation, and environmental, social, and governance considerations. By identifying conceptual ambiguities, empirical limitations, and contextual variations in existing research, the paper contributes to a deeper understanding of how corporate governance influences performance and outlines directions for future research aimed at developing more adaptive and context-sensitive governance frameworks.