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Criminal Conduct in Corporations: Can Strong Governance Prevent the Fallout on Firm Performance?

Author

Listed:
  • Wan Nailah Abdullah

    (Faculty of Accountancy, Universiti Teknologi MARA Cawangan Kedah, Kampus Sungai Petani, Merbok, Kedah, Malaysia)

  • Syahiza Arsad

    (Faculty of Accountancy, Universiti Teknologi MARA Cawangan Kedah, Kampus Sungai Petani, Merbok, Kedah, Malaysia)

  • Hasnisah Hassan

    (Faculty of Accountancy, Universiti Teknologi MARA Cawangan Kedah, Kampus Sungai Petani, Merbok, Kedah, Malaysia)

  • Rahayati Ahmad

    (Kulliyyah of Islamic Finance, Management Sciences and Hospitality, Universiti Islam Antarabangsa Sultan Abdul Halim Mu’adzam Shah, Kuala Ketil, Kedah, Malaysia)

  • Muhammad Arif

    (Faculty of Islamic Studies, Universitas Islam Riau, Riau, Indonesia)

Abstract

Corporate crime remains a pressing issue in today’s business environment, undermining organizational integrity, stakeholder trust, and long-term performance. Despite growing regulatory and scholarly attention, the mechanisms by which corporate governance can mitigate the adverse effects of corporate crime on firm performance remain underexplored. This conceptual paper aims to examine the mediating role of corporate governance in the relationship between corporate crime and firm performance. Employing a narrative review methodology, this study systematically collected and synthesized peer-reviewed literature from the Scopus database using a structured search string encompassing terms related to corporate crime, governance, and performance. The study identified key themes and theoretical insights that highlight how internal controls, board structure, regulatory compliance, and ethical leadership function as governance mechanisms to prevent or reduce the negative consequences of criminal conduct. The findings suggest that strong corporate governance not only deters corporate crime but also buffers its impact on firm performance by reinforcing accountability, enhancing transparency, and aligning management decisions with stakeholder interests. The study contributes to theoretical advancement by integrating agency theory and stakeholder theory to develop a framework that explains how governance mediates the dynamics between crime and performance. Practically, it offers actionable insights for regulators, corporate leaders, and policymakers to design effective governance structures that safeguard corporate reputation and financial outcomes. Limitations include the reliance on conceptual synthesis without empirical testing, prompting the need for future empirical research to validate and refine the proposed framework. This study highlights the crucial role of corporate governance in maintaining firm value in the face of misconduct.

Suggested Citation

  • Wan Nailah Abdullah & Syahiza Arsad & Hasnisah Hassan & Rahayati Ahmad & Muhammad Arif, 2025. "Criminal Conduct in Corporations: Can Strong Governance Prevent the Fallout on Firm Performance?," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 9(14), pages 1892-1901, August.
    • Handle: RePEc:bcp:journl:v:9:y:2025:issue-14:p:1892-1901
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    References listed on IDEAS

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    3. Jensen, Michael C. & Meckling, William H., 2008. "Theory of the firm: managerial behavior, agency costs and ownership structure," RAE - Revista de Administração de Empresas, FGV-EAESP Escola de Administração de Empresas de São Paulo (Brazil), vol. 48(2), April.
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