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DOI: 10.4172/2167-0234.1000365

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ISSN: 2167-0234

Review Article Open Access

Corporate Governance and Firm Performance: The Case of Tunisian

Jaleleddine Ben Rejeb and Ibtissem Missaoui*
ISG Sousse, Universite de Sousse, Tunisia

Abstract
In this article the effect of the corporate governance mechanism on corporate financial performance is studied.
For this study, a sample of 22 companies is used. Data is used for the period between 2006 and 2015. The variables,
employed in this study to measure firm performance, include return on assets, return on equity and price earnings ratio.
In this study we used ownership concentration, ownership foreign, duality_CEO, leverage, firm size and price
earnings ratio are the independent variables and their effects were measured on financial variables that are ROA, ROE
and EPS.
The principle findings describe above: we found no significant relationship between ownership concentration and
ROE and the no significant liking between ownership concentration and EPS. Also, we found no significant relationship
between ownership foreign and ROE. However, the association between ownership foreign and ROE and EPS are
significant. Also, CEO_Duality and ROE have a significant and positive relationship.

Keywords: Corporate governance; CEO duality; Ownership performance. Many works and academic studies have indicated the
structure; Financial performance; Earnings per share; Return on assets; following characteristics apply to corporate governance such as: (i)
Return on equity; Tunisia ownership concentration; (ii) duality of the CEO; (iii) foreign ownership
and (iv) others control variables. Each of these characteristics will be
Introduction discussed in details above.
During 2001, the financial scandals flanking corporations like Enron Testing the relationship between duality of the CEO and firm
and WorldCom have engendered worries and checking investors’ performance
confidence. This has spawned various legal reforms of corporate
governance in America and the revision of voluntary and self-regulatory The empirical research cannot supply a confirmed view on a
codes in Europe. Accordingly, corporate governance system has been contribution of duality to a firm’s performance. In Europe, Heidrick
an important area discussed again. Sarbanes-Oxley Act was enacted in and Struggles [1] indicated that 84 percent of firms separate the roles
2002 to enhance corporate governance which is viewed as the priority of a chair of a board and a CEO of a firm. According to a Hewa-
of financial revolution, in the expectation that governance quality may Wellalage and Locke 2011 study, in Sri Lanka, the Sri Lankan code of
be reinforced, public confidence retrieved, accuracy and reliability of good practice on corporate governance highlights the balance of power
financial information assured. The present research paper explores the within a company to reduce any one individual’s manipulate to the
effect of corporate governance upon firm performance among listed decision making process.
firms in Tunisia. The purpose of this research is to examine the impact
of corporate governance mechanism upon company performance. These rules provided the recommendation that when there is a
duality in a firm, a number of independent directors on a board should
Recently in the world, various empirical researches have been be a majority to provide balance and an effective and efficient operation
conducted to examine the association between corporate governance of a board. Chen, Lin, and Yi [2] showed the importance of a separation
quality and a corporate performance. of responsibility among a chairman and a CEO, for the period from
As such, the present research intends to quantify the contribution 1999 to 2003, many businesses had modified their existing structure
of corporate governance to the performance for listed companies in of duality to a non-duality structure. Ministry of Finance in Vietnam
Tunisia. In addition, literature review and previous empirical studies (2012) provides that “a chairman/chairwoman of a board should not be
have been referenced to develop a research framework and to develop in the position of the CEO of a company unless this duality is approved
research hypotheses related to the association between corporate by the annual general meeting of shareholders”. Another dilemma
governance and a firm’s performance. Prior works have presented that experienced by companies is whether the chairman of the board of
corporate governance can be calculated through the next elements: directors and CEO should hold different positions or not.
(i) ownership concentration; (ii) duality of the CEO; (iii) foreign
ownership.
In addition, a firm’s performance financial is measured by ROA, *Corresponding author: Ibtissem Missaoui, ISG Sousse, Laboratory
LAMIDED, Universite de Sousse, Tunisia, Tel: +21673368000; E-mail:
ROE and PES. This study has examined various research hypotheses [email protected]
based on a sample of 22 listed companies on Tunisian Stock Exchange
for the period of 10 years from 2006 to 2015, the longest possible data set Received December 18, 2018; Accepted January 23, 2019; Published January
30, 2019
when this study was conducted. The Ordinary Least Square (OLS) technique
is adopted together with other econometric techniques in this study. Citation: Rejeb JB, Missaoui I (2019) Corporate Governance and Firm Performance:
The Case of Tunisian. J Bus Fin Aff 7: 365. doi: 10.4172/2167-0234.1000365
Literature Review and Hypotheses Testing Copyright: © 2019 Rejeb JB, et al. This is an open-access article distributed under
the terms of the Creative Commons Attribution License, which permits unrestricted
Several the previous works from academic literature has wanted use, distribution, and reproduction in any medium, provided the original author and
to verify the association between the corporate governance and firm source are credited.

J Bus Fin Aff, an open access journal Volume 8 • Issue 1 • 1000364

ISSN: 2167-0234
Citation: Rejeb JB, Missaoui I (2019) Corporate Governance and Firm Performance: The Case of Tunisian. J Bus Fin Aff 7: 365. doi: 10.4172/2167-
0234.1000365

Page 2 of 7

Koufopoulos et al. [3] cite that since CEO has an influential power Findings indicated that results were mixed since Italian firms
on companies' strategic decisions, CEO that has dual role affect board's found to have negative relationship whereas positive relationship in
decisions and firm performance negatively. Also, Syriopoulos and French and German firms.
Tsatsaronis [4] note that dual role has a negative impact on monitoring
Hypothesis 4: Firm Leverage has a negative relation to firm
and decisions of the board of directors. Fama and Jensen affirmed that
performance.
duality would reduce a board’s surveillance of the management of a
company [5]. Testing the relationship between firm size and firm
According to Dar et al. [6] found CEO and chairman might performance
influence firm performance since if the same person works for both Some studies situations that there is a positive relationship between
positions, agency problem increases. In addition, Brickley et al. [7] firm size and firm’s financial performance [11]. Thereby, the increase
showed that holding two positions by one person will lead to a conflict in the size of the company favors the generation of internal funds
of interests and higher agency problem. and facilitates the access to external capital. Previously the firm size
This reduction results in an increase of costs to an agency. As a augments diversification in company’s operations increases as well and
result, this study’s research hypothesis is developed as follows: this leads to confusion in management [5].

Hypothesis H1: There is a negative association between CEO/ With this confusion, larger firms require more counseling than
Chairman Duality and firm performance. smaller firms on board. Furthermore, this will lead to more efficient
and more diversified company strategies. Hence larger companies
Testing the relationship between foreign ownership and firm might generate a better financial performance than smaller companies.
performance
On the other hand, there are some studies that show negative
Earlier and recent empirical studies conclude that the MNEs have relationship between firm size and financial performance. Nenova [12]
performed better than the domestically owned firms. Therefore, the found that larger companies need more oversight which ultimately
foreign ownership has positive influences on the firm’s performance. creates additional costs for businesses.
This might be true for developed countries; however, in developing
and transition economy, some findings are in contrast with earlier However, in the case of the increase in the size of the firm, Agrawal
empirical findings. In this section, the empirical results of foreign and Knoeber [13] affirmed that the management will lose control
ownership effects are reviewed in developed and developing countries. of its strategic and operational decisions. This will cause the loss of
efficiency. Therefore, it is argued that the probability of meeting with
Researches on firms with foreign ownership operating in developed agency problem is higher for large firms so it will cause a decrease in
countries, Goethals and Ooghe [8] conducted a study to investigate the firm performance. Moreover, large firms should have more advanced
performance between 25 Belgian firms and 50 foreign companies, which internal control than small corporations. Thereby the cost of auditing
are Belgian taken over by foreigners. They calculated twenty-eight increase to be able to act according to stakeholders’ interests [14].
financial ratios for both foreign and domestic firms and concluded that
foreign takeovers have positive impacts on the performance of firms by Hypothesis 5: There is a negative association between firm size and
using regression analysis. Moreover, the firms with foreign ownership firm performance.
performed better than their domestically owned counterparts. As a
result, this study’s research hypothesis is developed as follows: Testing the relationship between price earnings ratio (PER)
and firm performance
Hypothesis H2: There is a positive association between foreign
ownership and firm performance. Valuation models, such as the Gordon Growth model and the
Ohlson and Jeuttner-Nauroth (OJ) model, suggest that the P/E ratio
Testing the relationship between ownership concentration on is a function of expected earnings growth and expected rate of return.
firm performance Specifically, the theories predict that P/E ratio is positively correlated
with expected growth.
In this context, Gugler [9] tests the association between firm
profitability and ownership structure by focusing on the effect of Based on these results we establish our hypothesis:
ownership concentration and identity on a sample of non-financial
Austrian companies. In this study Gugler [9] found a significant and Hypothesis 6: There is a positive association between price earnings
negative relationship between ownership concentration and profit ratio and firm performance.
margin. Based on this literature the first hypothesis for this study is as Empirical Analysis
follows:
Research methodology and characteristics of a data sample
Hypothesis 3: ownership concentration has a negative relation to
firm performance. This part will include three sections. Study sample and resources
of data, second section will be study models and the last one will be
Testing the relationship between firm leverage and firm
measuring of variables and statistical tools. The information needed
performance about firm’s performance and corporate governance characteristics
The debt level of a firm has the potential to impact financial are collected from the Tunisian Stock Exchange database (TSE) which
performance due to costs of finance and risk of default. Essentially, contains 79 listed companies. Companies were selected according to
firm leverage consists of shareholders borrowing money for securities the following criteria: Data is available in the period of 10 years (2006
investment. Weill [10] investigated "the relationship between leverage to 2015). Companies have not been closed or emerged with any other
and corporate performance". company during the study period.

J Bus Fin Aff, an open access journal Volume 8 • Issue 1 • 1000365

ISSN: 2167-0234
Citation: Rejeb JB, Missaoui I (2019) Corporate Governance and Firm Performance: The Case of Tunisian. J Bus Fin Aff 7: 365. doi: 10.4172/2167-
0234.1000365

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As a result, listed firms missing any required data are excluded

from the final sample of the study. Our final sample only includes 22
listed firms with the total of 220 observations. The Sample Selection
procedure is displayed in Table 1.
The model proposed and definition of variables
Study models: This research tries to find the impact of corporate
governance on firm performance. Governance indices have been
constructed for Europe and the United Kingdom, Germany, Russia,
Korea, the United States, and several emerging markets. They are
used to illustrate the relation between corporate governance and
performance [11]. Mostly, these researches are significantly positive,
and in this study, a research framework is presented in Figure 1:
To determine the relation between corporate governance and
performance after controlling the factors, we estimate the following
regression models:
Model 1:
ROAi,t = β0+β1own_conit+β2duality_CEOi,t+β3foreign_owni,t+β4siz
ei,t+β5LEVREGEi,t+β6PERi,t+εt
Figure 1: Theoretical Framework model.
Model 2:
ROEi,t = β0+β1own_conit+β2duality_CEOi,t+β3foreign_owni,t+β4siz Variable Label Definition and Measurement
ei,t+β5LEVREGEi,t+β6PERi,t+εt Dependent variables
Model 3: Financial
ROE
Is the ratio of net profit attributed to
performance shareholders/equity.
PESi,t = β0+β1own_conit+β2duality_CEOi,t+β3foreign_owni,t+β4siz Operational Is the ratio of net income to the book
ROA
ei,t+β5LEVREGEi,t+β6PERi,t+εt performance value of total assets.
Stock
Measuring of variables: Variables used in this empirical study It could evaluate by is net income
performance: EPS
divided by total shares.
include: (1) dependent variable (firm’s performance); (2) independent earning per share
variables (corporate governance); plus (3) control variables. Concepts Independent variables:
and measurements of these variables are summarized in Table 2 below. Corporate governance characteristics:
Concentration
CON _OW Measured by the
Analysis, findings and discussion of data ownership
If ceo is chairman of the board its value
Table 3 below presents characteristics of the dataset used in this Duality ceo Duality_ceo
is 1 and otherwise the value is zero.
study including number of observations, mean, standard deviation, Foreign_ Measured by the percentage of forgien
Foreign_ own
max value and min value of independent and dependent variables. ownership ownership dividend by total equity
Control variables:
Firstly, the average of duality_ceo is 0.550 with the minimum Firm size Size Natural log of total assets
of -0.255 and a maximum of 0.618. This finding shows that most of Financial leverage Leverage The ratio of total debt to total assets.
sampled companies have different people that hold CEO and chairman Ratio for valuing a company that
positions in the company. The average of Concentration ownership is Price-to-Earnings
PER measures its current share price relative
Ratio
0.396 with the maximum of 0.616 and minimum of 0.069. The average to its per-share earnings
of ownership foreign is 0.134 with the minimum is zero and a maximum Table 2: Concepts and measurements of variables.
of 0.616. As control variable, the mean of firm age is 44, ranging from
11 to 88. This result shows that data from sample companies vary in control variable which has a range 36.075 and -1.670 with the mean of
different ages which may make the result more accurate. Leverage is a 1.895. It is possible to deduce that sampled companies vary in different
sizes hence we get a reliable conclusion. The mean of ROA is 4,4%, the
Sector Listed Companies Excluded Companies Study Sample mean of ROE is 4,09% and the mean of PES is 1.268.
Finance 27 27 0
Telecommunication 3 2 1
Pairwise correlation between independent variables
Consumer Services 10 6 4 This analysis was used to test the study to determine whether there
Industrial Sector 12 6 6 is a multicollinearity problem or not by understanding the relationship
Basic materials 5 2 3 among all independent variables. This problem occurs when two or
Health 2 1 1 more independent variables are highly correlated with each other
Technology 3 3 0 and this might affect the regression in a negative way. According to
Oil and Gas 1 0 1 Gujarati [15] high correlation among independent variables might
Consumer Goods 16 10 6 make the regression unreliable. Table 4 exhibits a correlation matrix,
Total 79 57 22 which explains the correlation of independent variables related to this
Table 1: Sample Selection procedure. research.

J Bus Fin Aff, an open access journal Volume 8 • Issue 1 • 1000365

ISSN: 2167-0234
Citation: Rejeb JB, Missaoui I (2019) Corporate Governance and Firm Performance: The Case of Tunisian. J Bus Fin Aff 7: 365. doi: 10.4172/2167-
0234.1000365

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As shown above, Duality_CEO has a negative relationship with Ho: Random effect is appropriate
concentration ownership (-0,247), foreign ownership (-0,370) and PER
H1: Fixed effect is appropriate
(0,114). But the correlation is positive with leverage (0,195) and size
Firm (0,017). While concentration ownership is positively correlated According to the Hausman test, p-value is 0,002 which is smaller
with leverage (0,079), firm size (0,064) and PER (0,077), Ownership than 0,05 (critical value to reject or not). So, Ho which is null hypothesis
concentration is negatively correlated with foreign ownership (-0,303). was rejected. Then by the use of fixed effect OLS. Test the hypothesis
Foreign ownership has negative relation with leverage (-0,104) but it is that;
positively related with firm size (0,201) and PER (0,006). Although firm
size has a negative association with PER (-0,010), leverage has a positive Ho: All dummy variables are zero (Pooled regression model)
relationship with size firm (0,409) and positive association with PER H1: All dummy variables are not zero (Fixed effect model)
(0,003).
Hence, the most appropriate method for ROA is pooled regression
The highest correlation is between size firm and leverage. This
positive correlation was expected since as the size firm might be model. This model was run with White cross section to remove
nominated to leverage increase as well. Overall the all outcomes heteroscedasticity.
are smaller than 0,80 which is the critical level to determine the Table 5 shows the regression results for ROA. The first column
multicollinearity problem. Hence, the findings show there is no proves the coefficient of all independent variables which indicates the
multicollinearity problem for this analysis. magnitude and direction of relation between financial performance
Regression Analysis measure (ROA) and independent variables. Column 2 represents their
standard errors and column 3 exhibits the t-value which states the
Relationship between corporate governance variables and significance of the regression outcomes. The R-squared represents the
return on asset degree or percentage up to which the sample describes the dependent
When this analysis is made, at first the Hausman test was run to test variables and F statistics tells us the overall significance of the model.
the hypothesis that; When it comes to the comments from analysis, the findings from OLS
EPS ROA ROE DUALITY_CEO CON_OWN FOREIGN_OWN LEV SIZE PER
Mean 1.268 0.044 0.040 0.550 0.396 0.134 1.895 18.1672 17.227
Median 0.482 0.041 0.084 1.000 0.398 0.017 0.980 17.992 12.748
Maximum 23.843 0.618 1.000 1.000 0.915 0.616 36.075 21.586 301.959
Minimum -10.696 -0.250 -3.800 0.000 0.069 0.000 -1.670 16.583 -273.843
Std. Dev. 3.656 0.092 0.359 0.498 0.157 0.1868 3.698 0.981 44.034
Skewness 2.097 1.251 -6.602 -0.201 0.165 1.266 5.777 1.237 -0.520
Kurtosis 12.856 12.006 65.888 1.040 2.6367 3.275 44.898 5.020 23.389
Jarque-Bera 1051.817 800.994 37851.700 36.68163 2.209 59.522 17315.530 93.537 3820.650
Probability 0.000 0.000 0.000 0.000 0.331 0.000 0.000 0.000 0.000
Sum 279.0582 9.899 9.016 121.000 87.193 29.622 417.0240 3996.803 3790.039
Sum Sq. Dev. 2927.646 1.874 28.348 54.450 5.400 7.646 2996.468 211.169 424641.9
Observations 220 220 220 220 220 220 220 220 220
Table 3: Descriptive analysis.

DUALITY_CEO CON_OWN FOREIGN_OWN LEV SIZE PER

DUALITY_CEO 1.000 -0.247 -0.370 0.195 0.017 -0.113
CON_OWN -0.247 1.000 -0.303 0.079 0.063 0.076
FOREIGN_OWN -0.370 -0.303 1.000 -0.104 0.213 0.006
LEV 0.195 0.079 -0.104 1.000 0.409 0.002
SIZE 0.017 0.063 0.213 0.409 1.000 -0.010
PER -0.113 0.076 0.006 0.002 -0.010 1.000
Table 4: Pairwise correlation.

Variable Coefficient t-statistic Std. Error Prob

c 0.001 0.022 0.090 0.982
DUALITY_CEO -0.012 -1.427 0.009 0.154
CON_OWN 0.081 2.003 0.040 (0.046)**
FOREIGN_OWN 0.064 3.084 0.020 (0.002)***
LEV -0.007 -2.925 0.002 (0.003)***
SIZE 0.001 0.203 0.005 0.838
PER 0.0001 1.423 7.80E-05 0.156
Adjusted R2 0.101
F statistic 2.632
Log of likelihood 231.453
Prob(F-statistic) 0.001
Durbin-Watson 1.379
Table 5: Ordinary Least Square (ROA).

J Bus Fin Aff, an open access journal Volume 8 • Issue 1 • 1000365

ISSN: 2167-0234
Citation: Rejeb JB, Missaoui I (2019) Corporate Governance and Firm Performance: The Case of Tunisian. J Bus Fin Aff 7: 365. doi: 10.4172/2167-
0234.1000365

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regression clearly shows mixed results between independent variables to their p-values, concentration ownership, Firm size and PER explain
and ROA. ROE significantly while CEO_duality, foreign_ownership and leverage
have an insignificant effect on ROE (See Table 8 for more information
Firstly, the regression outcomes show that ownership concentration
about rejection or confirmation of hypothesis).
and duality CEO positively related with financial performance
measured by ROA so increase in duality_CEO, concentration Adjusted R-squared of this model is 0,225 which mean that the
ownership, Size and PER to 6, 5%, 8%, 838% and 6, 5% increase in independent variables jointly explain approximately 23% of the
ROA. However, CEO duality and Leverage are inversely related with systematic variation in the dependent variable (ROE). Moreover, the
ROA by 1,2% and 7% respectively. Except size, ceo_duality, and PER, Durbin-Watson statistic is 2,225 so sampled data do not present first
all independent variables have significant impact on ROA according order serial correlation problem. Overall, F statistic and its p-value of
to their p-values. Especially Concentration ownership, Forgein_ this model are 5,261 and 0.0000. This means that corporate governance
ownreship and leverage have statistically significant impact on ROA. variables have a significant effect on ROE.
(See Tables 6-8 for more information about rejection or not rejection
of hypothesis). R-squared of 0,162 indicates that independent variables Relationships between the corporate governance variables
explain 16,22% of the systematic variation in the dependent variable and earning per share (EPS)
(ROA). In addition, the Durbin Watson statistic is 1,37 which is close
We follow also the same steps for Earnings per share (EPS). The
to two which means there is no autocorrelation problem in the sampled
result found by Hausman test was further than critical value ((0.580)
data. A general evaluation from this analysis is that F statistics and its
0,05). So unlike ROA, random effect model was found more appropriate
p-values are 2,63 and 0,0012 which is smaller than the critical point
for EPS and ROE.
of 0,05 hence corporate governance variables are found significantly
related with ROA. Duality_CEO, Concentration ownership, Forgein_ownership, Size
Firm and PER have positive associations with EPS. On the other hand,
Relationship between corporate governance variables and
leverage is inversely correlated with EPS. In the analysis, the effects of
ROE Duality_CEO, Concentration ownership and Size firm are insignificant
When this analysis is made, same steps were used with ROA and on EPS however Forgein_ownership, Levreage and PER are significant
the most appropriate method was found pooled regression model for on PES (See Table 8 for more information about rejection or not
ROE. rejection of hypothesis).
In the Table 6 we notice that concentration ownership, firm size In order of importance, the regression outcomes also indicate that
and PER have a positive impact on financial measurement (ROE). On the most significant relationship is between Forgein_ownership and
the other hand, CEO_duality, foreign_ownership and leverage have EPS with beta 3,544 and p value of 0,013. According, adjusted R-squared
negative effect on ROE by 5,8%, 2,7% and 4,8% respectively. According 0,0242 indicates approximately 2,242% of the variability in EPS. In

Variable Coefficient t-statistic Std. Error Prob

c -0.432983 -0.968724 0.446962 0.3338
DUALITY_CEO -0.058088 -3.439557 0.016888 0.0007
CON_OWN 0.187463 1.542141 0.121560 0.1246
FOREIGN_OWN -0.027508 -0.377929 0.072787 0.7059
LEV -0.048550 -2.956456 0.016422 0.0035
SIZE 0.028543 1.165308 0.024494 0.2453
PER 0.000511 1.413789 0.000361 0.1589
Adjusted R2 0.226
F statistic 5.261
Log of likelihood -50.797
Prob(F-statistic) 0.000
Durbin-Watson 2.225
Table 6: Ordinary Least Square (ROE).

Variable Coefficient t-statistic Std. Error Prob

c -0.935 -0.581 1.609 0.561
DUALITY_CEO 0.368 0.986 0.373 0.325
CON_OWN 2.160 1.328 1.626 0.185
FOREIGN_OWN 3.544 3.264 1.085 0.001***
LEV -0.206 -3.213 0.064 0.001***
SIZE 0.055 0.417 0.132 0.676
PER 0.003 1.811 0.001 0.071**
Adjusted R2 0.0242
F statistic 1.362
Log of likelihood -586.383
Prob(F-statistic) 0.000
Durbin-Watson 1.126
Table 7: Ordinary Least Square (EPS).

J Bus Fin Aff, an open access journal Volume 8 • Issue 1 • 1000365

ISSN: 2167-0234
Citation: Rejeb JB, Missaoui I (2019) Corporate Governance and Firm Performance: The Case of Tunisian. J Bus Fin Aff 7: 365. doi: 10.4172/2167-
0234.1000365

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Financial Measurement Independent Variable Relationship Direction Significant Value Result on Hypothesis
ROA Duality_CEO, Negative 0.154 Don’t reject H1
ROE Duality_CEO, Negative (0.000)** Don’t reject H1
EPS Duality_CEO, Positive 0.325 Reject H1
ROA Concentration ownership Positive 0.046 Reject H2
ROE Concentration ownership Positive 0.124 Reject H2
EPS Concentration ownership Positive 0.185 Reject H2
ROA Foreign_ownership Positive (0.002)** Don’t reject H 3
ROE Foreign_ownership Negative 0.705 Reject H3
EPS Foreign_ownership Positive (0.001)** Don’t reject H3
ROA Leverage Negative (0.003)** Don’t reject H4
ROE Leverage Negative (0.003)** Don’t reject H4
EPS Leverage Negative (0.001)** Don’t reject H4
ROA Size Firm Positive 0.838 Reject H4
ROE Size Firm Positive 0.245 Reject H4
EPS Size Firm Positive 0.676 Reject H4
ROA PER Positive 0.156 Don’t reject H5
ROE PER Positive 0.158 Don’t reject H5
EPS PER Positive 0.071 Don’t reject H5
*: Significant impact **: Statistically significant impact

Table 8: Summary of multiple regression analysis interpretation.

addition, durbin watson test resulted with 1,126 which is close to 2 information, to resolve agency conflict, better protection of rights and
hence the sampled data do not present any presence of autocorrelation better supervision of decision so increasing and improve the quality
problem. F statistics and its p-value which show insignificance level are of good corporate governance. However, these relationships are
1,362 and 0,169 which is further than 0,01. This means that corporate not significant for ROE and EPS. Only the effect on ROA was found
governance variables don’t have statistically significant impact on EPS. significant.
In summary, these three tables try to explain the effect of corporate When we compare the results with previous studies, there are lots of
governance variables on financial measurements which are ROA, ROE findings that support the results of Jensen and Meckling [14], Mustapha
and PES. Although ROE is strongly influenced by unstable market et al. [21] argue that introduction of managerial share ownership may
factors, such as investor behavior, and market forecasts the outcomes reduce these agency problems, thus aligning the interest of managers
show that ROE is the best measurement for exploring impacts of and shareholders. We found a positive and significant relationship
corporate governance variables on financial variables. This is because, it between forgien ownership and firm performance (ROE and EPS).
has the best adjusted R-squared which gives the percentage of variation
Our results are confirming by the works of Douma and Mihai et
explained by only corporate governance variables that in reality affect
al. [22], Corporations with foreign shareholders seemingly have higher
the financial measurements.
access to technical and financial resources.
Discussion
Conclusion
Table 8 presents the regression coefficients of the relationship
This paper analyzed the effect of corporate governance among 22
between the corporate governance and firm performance (measured
Tunisian listed companies between 2006 and 2015. In order to measure
by ROA and ROE and EPS model). Our results show a negative but no
corporate governance effects, six variables which are ownership
significant relationship between Duality_CEO and ROA. In addition,
concentration, foreign ownership, CEO duality, firm size (control
there is negative and significant relationship between Duality_CEO
variable), PER (control variable) and Leverage (control variable) were
and ROE. However, we found a positive but no significant relationship
chosen.
between Duality_CEO and PES.
This is because, comparing the same independent variables with
These results are consistent with the conclusions of several research
previous studies was aimed and it was hoped that these variables would
conducted such as Braun and Sharma [16], Lam and Lee [17] argue that,
have influence on firm performance. On the other hand, ROA, ROE and
duality may be negatively related to performance in some situations
EPS were selected as the tools to measure firm financial performance.
but may be positively related in some other situations.
The aim of this study was to explore whether there was an association
Further, "the appropriate board leadership structure is more likely
between corporate governance variables and firm performance of
to vary across firms, industries and countries". There is a combination
Tunisian listed companies or not.
of different industries in the sample and the industry effect of duality
and performance is unknown [18,19]. Following this argument and The result of the study shows us good corporate governance practices
consistent with, Dahya and Travlos, [20] Elsayed [19], this study significantly improve firm performances of sampled companies as we
further examines the industry specific impact on CEO duality and firm can understand from p-values that represent general non-significance
performance. of multiple regression analysis only the first regression is significant
(P-values; ROA; 0.0027, ROE; 0.1632, EPS; 0.5803).
Increasing concentration ownership, which is an important
variable for corporate governance, means increasing disclosure of From these findings, firms should understand that improving

J Bus Fin Aff, an open access journal Volume 8 • Issue 1 • 1000365

ISSN: 2167-0234
Citation: Rejeb JB, Missaoui I (2019) Corporate Governance and Firm Performance: The Case of Tunisian. J Bus Fin Aff 7: 365. doi: 10.4172/2167-
0234.1000365

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good corporate governance applications is a significant tool to realize 4. Syriopoulos T, Tsatsaronis M (2011) Corporate Governance Mechanisms and
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financial sustainability, good financial performance and market value.
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The study provides an important insight into the Tunisian financial
market and Tunisian companies in terms of corporate governance 5. Fama EF, Jensen MC (1983) Separation of Ownership and Control. J Law and
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6. Dar L, Akmal A, Naseem MA, Khan KUD (2011) Impact of Stress on Employees
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importantly, the result may be a good guideline for stakeholders and Business Research 11: 1-4.
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Hereby, with this study we accomplished our aim. We wished that this country analysis. Journal of Financial Economics 68: 325-351.
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Several areas of future research can be suggested. Firstly, in this 14. Jensen MC, Meckling WH (1976) Theory of the Firm: Managerial Behavior,
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J Bus Fin Aff, an open access journal Volume 8 • Issue 1 • 1000365

ISSN: 2167-0234