The Relationship Between Corporate Governance and the Performance of the Firm: a Literature Review With a Focus on the Vietnamses Enterprises

The issue of corporate governance has become familiar and progressively common over the last two decades. Good corporate governance plays an important role in creating a good relationship among board members, managers, stockholders and stakeholders. This results in well controlled and oriented business development for the company. Good corporate governance will not only promote the firm's activities and increase the firm's abilities to access the external sources of capital but it will also encourage the firm to create business values and control systems consistent with the risks involved. It seems that good corporate governance is crucial to the success of almost any company all over the world. However, in the context of Vietnam, the effect of corporate governance has only recently received just a little recognition. This is because most Vietnamese firms have a very basic knowledge of corporate governance at the moment. Corporate governance is usually referred to as a main driver of a firm's performance, especially listed firms that belong to an Index. However, previous research often brings to light many controversial findings about the impact of corporate governance on firm performance. This study makes an attempt to review the literature of corporate governance and its impact on the performance of firms, with a focus on Vietnamese companies. This is useful due to the rarity of studies about relationships between corporate governance and firm performance in the context of Vietnam. In this study, a range of elements that contribute to corporate governance will be identified, namely, the duality of the CEO (the Chief Executive Officer holds the position of the Chairman of the Board); independence of Audit Committee members; stock ownership of institutional investors; and, the use of stock options for executive compensation. The findings of this study will give suggestions for future empirical research on the relationship between corporate governance and a firm's performance in the context of Vietnam.