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Corporate governance and financial performance in an Australian context

Working Paper 2009-02

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The concept of corporate governance has attracted considerable attention, domestically and internationally, in recent years. Previous research, largely conducted using international data, has suggested that better governed firms outperform poorer governed firms in a number of key areas.

This paper examines the relationship between a company’s adoption of the Australian Securities Exchange (ASX) Corporate Governance Council’s Principles of Good Corporate Governance and Best Practice Recommendations (ASX Corporate Governance Principles) and its financial performance in the areas of shareholder performance, operating performance and one year sales growth for the top 300 Australian listed companies.

Our results suggest that companies demonstrating greater compliance with the ASX Corporate Governance Principles outperform less compliant companies in each of these three financial areas.