Relationship between Governance Structure and Financial Performance in Construction

Abstract

Although corporate governance has emerged as an issue of considerable importance in shaping the organizational structure and the vision of the firm, this entity has yet to receive sufficient scrutiny in the construction industry. The purpose of this study is to determine the extent by which the configuration of corporate governance may impact on the financial performance of construction firms. The investigation utilizes 100 companies of differing sizes. The analysis reveals that a critical mass of outside independent directors and the dissociation of the roles of CEO and Chairmanship of the board do translate into superior financial market returns for the firms. Other corporate governance variables have no apparent impact on the financial performance of the firms. These findings are significant to construction firms that are already established or in the process of being formed.