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- Title
VALUE-BASED MANAGEMENT, CORPORATE GOVERNANCE AND ORGANIZATIONAL PERFORMANCE: EVIDENCE FROM THE UK.
- Authors
Elgharbawy, Adel; Abdel-Kader, Magdy
- Abstract
This study aims to develop a contingency framework for the relationship between Value-based Management (VBM), corporate governance (CG) and organizational performance. It examines whether a fit between contingency variables (agency conflicts, strategy and decentralization), and VBM implementation is associated with performance. It also examines whether CG, as operationalized by compliance with the Combined Code on Corporate Governance (CCCG), mediates the relationship between VBM and performance. To achieve this aim, a cross-sectional survey, based on a questionnaire, was conducted to identify the level of VBM implementation and contingency variables in the large and medium quoted companies in the UK. The questionnaire targets the Chief Financial Officers (CFOs) in these companies as key informants. In addition, a content analysis of the annual reports of the sampled companies was used to measure the level of compliance with the CCCG. Financial data have been obtained from the DataStream. The Partial Least Squares Structural Equation Modelling (PLS-SEM) was used for data analysis. The results suggest that VBM implementation is positively associated with agency conflicts, low cost strategies and decentralization. Compliance with the CCCG is positively associated with agency conflicts and the fit between them is associated with the market-based performance. VBM has no significant direct effect on the market-based performance. However, it has indirect positive effect on the market-based performance acting through compliance with the CCCG as a mediating variable. These results shed light on the importance of considering contingency variables, as well as CG in addressing the relationship between VBM and performance, which help explain the mixed results in the VBM literature. The results also can help managers and directors in designing performance management systems (PMSs) that fit in with context. The study contributes to the literature by developing a theoretical model that links a PMS, i.e. VBM, to CG practices bridging the gap between the CG and management accounting literature using the lenses of agency and contingency theories.
- Subjects
UNITED Kingdom; VALUE-based management; CORPORATE governance; ORGANIZATIONAL performance; CONTINGENCY theory (Management); AGENCY theory; SMALL business
- Publication
Journal of Developing Areas, 2021, Vol 55, Issue 2, p115
- ISSN
0022-037X
- Publication type
Article
- DOI
10.1353/jda.2021.0035