Why has the literature on corporate governance and firm performance yielded mixed results?

This paper argues that a primary reason for the mixed results observed in the corporate governance and firm performance literature is that the relevant theories have not been applied to the class of phenomena they were designed to explain. For instance, the literature that focuses on ownership structure and firm performance employs entrepreneurial agency theories of the firm but applies them to managerial firms where ownership is separated from control. This is evidenced by the fact that firms in which managerial ownership is close to zero percent are included in the samples. After similarly analyzing other related governance and performance literatures, the paper provides orientation and recommendations for researchers to avoid the identified problems and secure future progress.