Effect of Corporate Governance on the Outcome of Corporate Investment Decisions in Ghana

ABSTRACT This study examines the effects that Corporate Governance has on the outcome of Corporate Investment Decisions of Ghanaian Companies. This research is conducted on 19 Ghanaian companies sub-divided into Multinational and local Companies. Multiple regression analysis is used in this study in estimating the relationship between corporate governance characteristics and the outcome of investing decisions. The independent variables used which are Firm Size, Board Size, Board Independence, CEO Duality, Size of Audit Committee and the Independence of Audit Committee; represent the measure of corporate governance for this study. The results of this study show that for all 19 Ghanaian Firms, the Board Size, Board Independence and Size of Audit Committee are variables relevant in making sound investing decisions whose benefits companies can enjoy over a number of years. For multinationals, Board Independence, the Size of Audit Committee and the Independence of Audit Committee have positive relationships with investing decisions while for local companies the Board Size, Board Independence and the Independence of the Audit Committee are the variables having a positive relationship with the outcome of investment decisions. This paper adds to the limited evidence on the governance-performance relationship that exists in Ghana but approaches the topic by focusing mainly on the outcome of investing decisions (capital budgeting decisions). This study can inform governance policy making in Ghana. Keywords: Investment Decisions, Corporate Governance, Multiple Regression and Firm Performance