Theoretical Framework for Corporate Governance

History has revealed that there is a never-ending evolution of theories or models of corporate governance. Companies are trying to instill the sense of governance into their corporate structure. This article is a review of literature on the range of theories in corporate governance. The fundamental theories in corporate governance began with the agency theory, expanded into stewardship theory and stakeholder theory and evolved to transaction cost theory. However, these theories address the cause and effect of variables, such as the configuration of board members, audit committee, independent directors and the role of top management and their social relationships rather than its regulatory frameworks. Hence, it is suggested that a combination of various theories is best to describe an effective and good governance practice rather than theorizing corporate governance based on a single theory.