The Moderating Effect of the COVID-19 Pandemic on the Relation between Corporate Governance and Firm Performance

Hossein Tarighi (), Zeynab Nourbakhsh Hosseiny (), Maryam Akbari and Elaheh Mohammadhosseini
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Hossein Tarighi: Department of Accounting, Attar Institute of Higher Education, Mashhad 9177939579, Iran
Zeynab Nourbakhsh Hosseiny: Department of Accounting, Technical and Vocational University (TVU), Tehran 9188753178, Iran
Maryam Akbari: Department of Accounting, University of Science and Culture, Tehran 1461968151, Iran
Elaheh Mohammadhosseini: Department of Accounting, Technical and Vocational University (TVU), Tehran 9188753178, Iran

JRFM, 2023, vol. 16, issue 7, 1-43

Abstract: The present study aims to investigate the association between corporate governance mechanisms and financial performance among companies listed on the Tehran Stock Exchange (TSE). We also want to know if the COVID-19 global crisis moderates the relationship between them. The study sample consists of 1098 observations and 183 companies listed on the TSE from 2016 to 2021; furthermore, the statistical method used to test the hypotheses is panel data with random effects. In line with our expectations, the results show that the coronavirus pandemic worsened Iranian corporate performance. In support of agency theory, we figure out that board independence, board meeting frequency, and board financial expertise are correlated positively with firm value. In favor of resource dependency theory, this study finds robust evidence that audit committee size and independence have a positive effect on corporate performance. Most importantly, the positive linkage between board independence, board financial expertise, size, and independence of audit committee with firm performance was reversed during the COVID-19 pandemic, although the positive role of board meeting frequency in corporate profitability remained stable even during the COVID-19 outbreak. Furthermore, the outcomes indicate that CEO duality affects firms negatively, and this devastating effect became even stronger with the COVID-19 pandemic. Finally, we find that firms involved in mergers and acquisitions (M&A) managed to increase shareholders’ wealth using competitive advantage even during the pandemic.

Keywords: the COVID-19 pandemic; corporate governance; corporate performance; Tehran Stock Exchange (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2023
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