The relationship between corporate governance practices and firm performance in the junior Canadian Life Sciences sector

Abstract

The relationship between four corporate governance characteristics and six measures of firm performance are examined in a sample of sixty-two Life Sciences firms listed on Canada’s TSX-Venture stock exchange. Results from univariate and logistic regression analyses support prior corporate governance research by demonstrating that the effect of good corporate governance structures on firm performance may be contingent on the specific circumstances within the firm or even the industry as a whole. Majority independence of the Board of Directors was found to have minor negative impact on firm performance. CEO duality was shown to enhance firm performance as proxied by return on assets; this result is contrary to expectations based on the agency model of corporate governance, but consistent with this study’s hypothesis. Gender diversity of the Board indicated mixed results, showing a negative association with firm performance. Equity ownership by the Board was associated with better firm performance. In sum, this study shows that significant associations are present among the selected corporate governance factors and relevant measures of performance for junior Canadian Life Sciences firms. These findings should be used as a basis for further investigation which may include expanding the sample and the time frame. Ultimately, this research may serve to provide guidance to industry and indicators to investors of future firm performance.