Abstract
PurposeThis study aims to reconcile some of the conflicting results in prior studies of the board structure–firm performance relationship and to evaluate the effectiveness and applicability of agency theory in the specific context of Italian corporate governance practice.Design/methodology/approachThis research applies a dynamic generalised method of moments on a sample of Italian listed companies over the period 2003-2015. Proxies for corporate governance mechanisms are the board size, the level of board independence, ownership structure, shareholder agreements and CEO–chairman leadership.FindingsWhile directors elected by minority shareholders are not able to impact performance, independent directors do have a non-linear effect on performance. Board size has a positive effect on firm performance for lower levels of board size. Ownership structure per se and shareholder agreements do not affect firm performance.Research limitations/implicationsThis paper contributes to the literature on agency theory by reconciling some of the conflicting results inherent in the board structure–performance relationship. Firm performance is not necessarily improved by having a high number of independent directors on the board. Ownership structure and composition do not affect firm performance; therefore, greater monitoring provided by concentrated ownership does not necessarily lead to stronger firm performance.Practical implicationsThis paper suggests that Italian corporate governance law should improve the rules and effectiveness of minority directors by analysing whether they are able to impede the main shareholders to expropriate private benefits on the expenses of the minority. The legislator should not impose any restrictive regulations with regard to CEO duality, as the influence of CEO duality on performance may vary with respect to the unique characteristics of each company.Originality/valueThe results enrich the understanding of the applicability of agency theory in listed companies, especially in Italy. Additionally, this paper provides a comprehensive synthesis of research evidence of agency theory studies.
Highlights
The active role in company affairs that boards of directors play (Judge and Reinhardt, 1997; Coles, McWilliams, and Nilanjan, 2001) can provide a platform (Aluchna, 2010) and an essential mechanism for mitigating the agency problem that arises between shareholders and management (Jensen and Meckling, 1976; Monks and Minow, 2004)
This research studies the effects of the main corporate governance characteristics on firm performance among Italian listed companies
We use a sample of Italian listed companies that adopt the best corporate governance practices: those firms listed in the STAR segment over the period from 2003 to
Summary
The active role in company affairs that boards of directors play (Judge and Reinhardt, 1997; Coles, McWilliams, and Nilanjan, 2001) can provide a platform (Aluchna, 2010) and an essential mechanism for mitigating the agency problem that arises between shareholders and management (Jensen and Meckling, 1976; Monks and Minow, 2004). The majority of agency theory studies are based on quantitative methodologies, and analyse Anglo-American listed companies (Yermak, 1996; Dalton, Daily, Ellestrand, and Johnson, 1998; Raheja, 2005); emerging and developing markets (Ehikioya, 2009), and selected European countries, such as Spain, Germany, France (De Andres and Vallelado, 2008; Donadelli, Fasan and Magnanelli, 2014; Bottenberg, Tuschke, and Flickinger, 2017). The Italian model has some distinctive characteristics which differentiate it from the two main corporate governance models. These include: 52 ownership concentration; the limited role of financial markets; and the prevalence of family-owned listed companies. It is important to understand whether and how corporate governance mechanisms affect the performance of Italian listed companies, as these mechanisms are the main drivers of corporate
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
