Explanatory variables belong to three categories, namely board parameters, CEO characteristics and ownership specifics. An analysis is conducted using a panel ordinary least squares regression and the Hausman specification test applied to determine whether a model with fixed or random effect is more appropriate to employ.
The outcomes of the analysis expose board size, number of independent directors, firm size and crisis to be significant determinants of firms’ return on assets.
The idea of CG indicates how a firm should be managed by those assigned responsible for strategic decisions and company prosperity.
Since the division of ownership and executive functions among medium and large businesses, an issue of proper and sufficient control of managers by shareholders of the company has arose.
Thus, the central role of the board of directors in the establishment of the principles of effective CG in every firm should not be underestimated.
The main target of implementing CG practices in a firm is to maintain and increase shareholder value by introducing mutually supportive mechanisms of control and stimulation of managers (Babic et al., 2016).Corporate governance (CG) is the process and mechanism by means of which the business is managed aimed at attaining firm well-being. (2000) argued CG to be a range of tools using which external non-controlling investors secure themselves from power usurpation by the insiders.In this case, executive managers and controlling investors are considered as insiders as they have more information on the actual performance of the company and may utilise it in their own interests at the expense of small shareholders who have no power to affect corporate decisions (Nheri, 2014).Among the suggested mechanisms of control, a board of directors has become one of the most efficient systems of supervision and coordination of the work of a business (Manini and Abdillahi, 2015).In the absence of the board, insiders were the only power in managing a corporation while the opinions of small shareholders were often ignored.Performance-linked payment means that a CEO is not paid only in cash but a share of the compensation is optional and depends on financial results of the company.Another option is partial payment of remuneration in the form of firm stock.The degree to which a country’s public entities observe basic principles of good corporate governance is an increasingly important factor for attracting investment capital, maintaining economic stability and encouraging growth.Zimbabwe is faced with the challenge of restructuring for greater efficiency and creating an investment-friendly environment, therefore practicing good corporate governance in public entities is crucial for success and economic growth.The board consists of executive top-managers such as Chief Executive Officer (CEO), Chief Financial Officer (CFO) and others and a number of non-performing (outsider, non-executive, NEDs) directors who are not directly engaged in company’s everyday activities but mostly play a role of supervisors and controllers of executives (Aluchna and Pindelski, 2014).Particular structure of the board remains an object of discussion.