CORPORATE GOVERNANCE AND FINANCIAL ACCOUNTABILITY A LITERATURE REVIEW PERSPECTIVE

Abstract

This literature review explores the intricate relationship between corporate governance and accountability within contemporary organizational structures. It underscores the growing global significance of corporate governance, particularly in light of high-profile corporate scandals such as Enron and WorldCom, which spurred widespread reforms and heightened investor awareness. The review draws upon key theoretical frameworks, including agency theory, stakeholder theory, shareholder theory, stewardship theory, resource dependency theory, and the knowledge-based view, to analyze how corporate governance mechanisms influence corporate behavior, performance, and accountability. Agency theory, which remains the dominant paradigm, emphasizes the mitigation of conflicts between principals (shareholders) and agents (managers) through oversight structures like independent boards and financial disclosure. Conversely, stakeholder and stewardship theories expand the accountability narrative to encompass ethical leadership and the broader social responsibilities of firms. The review further evaluates various corporate governance models to include financial, cognitive, contractual, and decision-making models and explores international principles and codes, notably the OECD guidelines that shape governance practices across diverse legal systems. It reveals how corporate governance fosters transparency, ethical conduct, and long-term sustainability by aligning managerial actions with stakeholders’ interests. Empirical evidence also affirms that attributes such as board diversity, audit committee effectiveness, and regulatory frameworks critically enhance accountability. Ultimately, the review calls for continuous adaptation of governance systems to respond to evolving technological, regulatory, and societal expectations, ensuring that accountability remains central to corporate operations.