On the Moderating Effects of Country Governance on the Relationships between Corporate Governance and Firm Performance

This study further empirically examines the influence of board independence on financial performance by using the world's top 1000 firms. CEO duality and the percentage of independent directors are used as the indicators of board independence. Moreover, this study re-addresses the findings in the literature by giving supplement in theory and conducting tests for the influence of board independence on firm performance as well as the moderating effects of country governance, focusing on regulatory quality and rule of law, with multi-level modeling, a more sophisticated statistical approach. Four hypotheses, based on agency theory and compensation theory, were developed. The results indicated that CEO duality and the percentage of independent directors exerted, respectively, negative and positive influence on Return on Assets (ROA), a firm performance indicator. Furthermore, regulatory quality and the rule of law positively moderated the negative effects of the former and negatively moderated the positive effects of the latter. Some practical implications were discussed based on the results obtained.