The CMA Code Of Corporate Governance: Tiifi Ink Between Compliance And Firm Performance

Abstract

Recent empirical work in developed markets shows evidence for higher valuation of firms in countries with a better legal environment. We investigate whether differences in the quality of firms corporate governance reporting also help to explain firm performance in a cross-section of companies listed at the Nairobi Stock Exchange. Constructing a broad Kenyan corporate governance index (KCGI) for Kenyan public firms, we document a positive relationship between governance practices and firm performance. An investment strategy that bought high-KCGI firms and shorted low- KCGI firms would earn significant abnormal returns.