IDEAS home Printed from https://ideas.repec.org/a/bjf/journl/v11y2026i4p0000.html

Corporate Governance, External Environment and Organizational Performance A Review of the Current Empirical and Theoretical Evidence

Author

Listed:
  • Stephen Ngala Muthoka

    (PhD Student, University of Nairobi)

  • Mohamed Omar

    (Lecturer in Department of Business Administration-Faculty of Business and Management Sciences strategic University of Nairobi in Nairobi)

Abstract

The study aims to review and expand general understanding on the relationship between corporate governance, external environment and firm performance. The study is motivated by the current debate on strategic role of external environment in corporate governance on organizational performance relationship. Using narrative review as its guiding approach to draw themes and insights, the study examines empirical and theoretical literature that looked at the influence of the external environment on the relationship between corporate governance and organizational performance. The study is anchored on three theories; the agency theory (Jensen and Meckling (1976), resource dependance theory (Pfeffer, & Salancik, 1978) and Resource based view (Birger Wernerfelt, 1984; Barney 1991). The agency theory, explains the relationship between the two key players of an organization, the principal, who is the owner, and the agent, who is the manager. The resource dependency theory suggests that the external environment holds resources which are needed by the organization to survive and that since an organization does not operate in a vacuum but in an environment, for it to succeed it must align its operations with the environment. In this paper focus is placed on external environment as one of the strategic resources which play a key role in the relationship between corporate governance and organizational performance. In conclusion, this paper postulates that external environment influences the relationships between corporate governance and organizational performance.

Suggested Citation

  • Stephen Ngala Muthoka & Mohamed Omar, 2026. "Corporate Governance, External Environment and Organizational Performance A Review of the Current Empirical and Theoretical Evidence," International Journal of Research and Innovation in Applied Science, International Journal of Research and Innovation in Applied Science (IJRIAS), vol. 11(4), pages 1, April.
    • Handle: RePEc:bjf:journl:v:11:y:2026:i:4:p:0000
    as

    Download full text from publisher

    File URL: https://rsisinternational.org/journals/ijrias/uploads/vol11-iss4-pg339-349-202604_pdf.pdf
    Download Restriction: no
    File URL: https://rsisinternational.org/journals/ijrias/view/corporate-governance-external-environment-and-organizational-performance-a-review-of-the-current-empirical-and-theoretical-evidence-2/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Dimitrios Kafetzopoulos & Evangelos Psomas & Dimitris Skalkos, 2019. "Innovation dimensions and business performance under environmental uncertainty," European Journal of Innovation Management, Emerald Group Publishing Limited, vol. 23(5), pages 856-876, November.
    2. Papadimitri, Panagiota & Pasiouras, Fotios & Tasiou, Menelaos & Ventouri, Alexia, 2020. "The effects of board of directors’ education on firms’ credit ratings," Journal of Business Research, Elsevier, vol. 116(C), pages 294-313.
    3. Ma Ying & Gashaw Awoke Tikuye & He Shan, 2021. "Impacts of Firm Performance on Corporate Social Responsibility Practices: The Mediation Role of Corporate Governance in Ethiopia Corporate Business," Sustainability, MDPI, vol. 13(17), pages 1-21, August.
    4. Ross, Stephen A, 1973. "The Economic Theory of Agency: The Principal's Problem," American Economic Review, American Economic Association, vol. 63(2), pages 134-139, May.
    5. Zhou, Haiyan & Owusu-Ansah, Stephen & Maggina, Anastasia, 2018. "Board of directors, audit committee, and firm performance: Evidence from Greece," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 31(C), pages 20-36.
    6. Chiu-Hui Wu, 2021. "On the Moderating Effects of Country Governance on the Relationships between Corporate Governance and Firm Performance," JRFM, MDPI, vol. 14(3), pages 1-13, March.
    7. Penrose, Edith, 2009. "The Theory of the Growth of the Firm," OUP Catalogue, Oxford University Press, edition 4, number 9780199573844.
    8. Ahmad Yuosef Alodat & Zalailah Salleh & Hafiza Aishah Hashim & Farizah Sulong, 2021. "Corporate governance and firm performance: empirical evidence from Jordan," Journal of Financial Reporting and Accounting, Emerald Group Publishing Limited, vol. 20(5), pages 866-896, August.
    9. Patrick Mikalef & Adamantia Pateli & Rogier van de Wetering, 2021. "IT architecture flexibility and IT governance decentralisation as drivers of IT-enabled dynamic capabilities and competitive performance: The moderating effect of the external environment," European Journal of Information Systems, Taylor & Francis Journals, vol. 30(5), pages 512-540, September.
    10. Martin Kyere & Marcel Ausloos, 2021. "Corporate governance and firms financial performance in the United Kingdom," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 1871-1885, April.
    11. Farhang Salehi & Bentolhoda Abdollahbeigi & Seyedyaser Sajjady, 2021. "Impact of Effective IT Governance on Organizational Performance and Economic Growth in Canada," Post-Print hal-05187999, HAL.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Stephen Ngala Muthoka & Mohamed Omar, 2026. "Corporate Governance, External Environment and Organizational Performance A Review of the Current Empirical and Theoretical Evidence," International Journal of Research and Innovation in Applied Science, International Journal of Research and Innovation in Applied Science (IJRIAS), vol. 11(4), pages 129-139, April.
    2. Amal Yamani, 2024. "The synergistic influence of board gender diversity and audit committee on the financial performance of Saudi Arabian banks," International Journal of Accounting, Business and Finance, Indian Accounting Association, Patna Branch, vol. 3(2), pages 61-77.
    3. Jin, Jian & Gao, Bei, 2025. "Going with the flow or standing by: Managerial climate risk perception bias and corporate green transformation — Evidence from China," Energy Economics, Elsevier, vol. 148(C).
    4. Adams, Michael & Kastrinaki, Zafeira, 2025. "Do board meetings matter in the insurance industry?," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 59(C).
    5. repec:bcp:journl:v:7:y:2023:i:6:p:372-387 is not listed on IDEAS
    6. Md. Mominur Rahman & Bilkis Akhter, 2021. "The impact of investment in human capital on bank performance: evidence from Bangladesh," Future Business Journal, Springer, vol. 7(1), pages 1-13, December.
    7. Karbowski, Adam, 2009. "The corporate governance implications for China," MPRA Paper 73625, University Library of Munich, Germany.
    8. Adi Masli & Matthew G. Sherwood & Rajendra P. Srivastava, 2018. "Attributes and Structure of an Effective Board of Directors: A Theoretical Investigation," Abacus, Accounting Foundation, University of Sydney, vol. 54(4), pages 485-523, December.
    9. Ernest Dautovic, 2019. "Has Regulatory Capital Made Banks Safer? Skin in the Game vs Moral Hazard," Cahiers de Recherches Economiques du Département d'économie 19.03, Université de Lausanne, Faculté des HEC, Département d’économie.
    10. Chen, Xuchang & Wu, Changqi & Xie, Xuanli, 2025. "Foreign ownership and corporate litigation risk," Journal of Business Research, Elsevier, vol. 189(C).
    11. Dayuan Li & Jialin Jiang & Lu Zhang & Chen Huang & Ding Wang, 2023. "Do CEOs with Sent-Down Movement Experience Foster Corporate Environmental Responsibility?," Journal of Business Ethics, Springer, vol. 185(1), pages 147-168, June.
    12. Myint Moe Chit, 2018. "Political openness and the growth of small and medium enterprises: empirical evidence from transition economies," Empirical Economics, Springer, vol. 55(2), pages 781-804, September.
    13. Xin Qu & Majella Percy & Fang Hu & Jenny Stewart, 2022. "Can CEO equity‐based compensation limit investment‐related agency problems?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(2), pages 2579-2614, June.
    14. Fikayo Akeredolu, 2026. "Principal–Agent Theory and Results-Based Climate Finance: A Review of Lessons from the World Bank's Initiative for Sustainable Forest Landscapes," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 10(2), pages 8018-8027, February.
    15. Zhaohui Yan & Mingli Wang & Yumeng Sun & Zihui Nan, 2023. "The Impact of Research and Development Investment on Total Factor Productivity of Animal Husbandry Enterprises: Evidence from Listed Companies in China," Agriculture, MDPI, vol. 13(9), pages 1-21, September.
    16. Patrick Velte, 2025. "Audit Quality and Materiality Disclosure Quality in Integrated Reporting: The Moderating Effect of Carbon Assurance Quality," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 32(3), pages 3785-3801, May.
    17. Amira Neffati & Wided Khiari & Azhaar Lajmi, 2020. "Corporate Governance And Post-Merger Performance: Evidence From Us Banks," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 9(3), pages 99-113.
    18. Anggita Langgeng WIJAYA & Ima Widha RATNASARI, 2023. "The Effect of the Audit Committee on the Firm Value of State-Owned Enterprises in Indonesia: The Mediation Role of Financial Performance," CECCAR Business Review, Body of Expert and Licensed Accountants of Romania (CECCAR), vol. 4(6), pages 60-72, June.
    19. Robert E. Till & Mary Beth Yount, 2019. "Governance and Incentives: Is It Really All about the Money?," Journal of Business Ethics, Springer, vol. 159(3), pages 605-618, October.
    20. Dimitrios Karakostas & Ioannis Tsakalos & Athanasios Fassas & Dimitris Kenourgios, 2026. "The disciplinary effect of banking supervision: is the EU-wide 2023 stress test merely a supervisory formality?," Journal of Banking Regulation, Palgrave Macmillan, vol. 27(1), pages 1-11, March.
    21. Nils Grashof, 2020. "Sinking or swimming in the cluster labour pool? A firm-specific analysis of the effect of specialized labour," Jena Economics Research Papers 2020-006, Friedrich-Schiller-University Jena.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bjf:journl:v:11:y:2026:i:4:p:0000. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dr. Renu Malsaria (email available below). General contact details of provider: https://rsisinternational.org/journals/ijrias/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.