The impact of the internal governance mechanisms on the value creation

Abstract

Governance has its origins in the theory of agency, initially supported by Berle and Means in 1932 and developed by Jensen and Meckling in an article published in the Journal of Financial Economics in 1976. The agency relationship takes the form of a separation between the functions of management and control. By its nature, this relationship is not riskless, it can induce agency problems insofar as the interests of managers and those of shareholders can diverge.

Given this relationship, the purpose of establishing a system of governance within companies is to limit potential divergences of interest and the opportunistic behavior of managers, and to encourage them to do their best. Traditionally we distinguish two types of governance mechanisms: internal and external. However, the most widespread internal governance mechanisms are: the board of directors, the general meeting of shareholders, the compensation system and the dividend policy. The objective of our work is to study the impact of these mechanisms on the creation of value. We will thus attempt to determine on a sample of listed Moroccan companies the relationships that exist between the various internal mechanisms of governance and the creation of value.

JEL Classification: G39

Paper type: Theoretical Research .