Abstract
The economic and social transformations, the bankruptcies recorded, and the financial crisis affecting all economies have increased the interest for the corporate governance concept. Our intention in this paper was to study the impact of corporate governance attributes on performance given the information published by the entities listed on five stock exchanges from Europe, namely the main market from Bucharest Stock Exchange (BSE) in Romania, the Athens Stock Exchange(ATHEX) main market in Greece, Financial Times Stock Exchange 100 Index (FTSE 100) from Great Britain, Spanish Stock Exchange 35 Index (IBEX 35) from Spain, and Warsaw Stock Exchange 20 Index (WIG 20) from Poland, between 2016–2018. Through mathematical modeling and multiple linear regression, we aimed to determine the extent to which corporate governance characteristics, firm characteristics, industry and stock market fixed effects, and random effects influence the performance of 226 entities included in our sample. The empirical findings revealed that CEO duality, the number of non-executive directors and women on board, audit committee, and audit opinion influenced performance measured by the Return on Assets (ROA) and Return on Equity (ROE) indicators. The ideas highlighted and the results obtained in this research contribute to the literature that analyzes the extent to which an effective governance determines the increase in performance, needed for a sustainable development.
Highlights
The failures that have taken place over time, such as the financial scandals generated mainly by the participants involved in the management of companies, such as Enron, WorldCom, Parmalat, or Gupta, and the bankruptcies caused by the global financial crisis have led to declining the investors’ confidence in the managers’ abilities in leading large corporations
The results in this domain are not consistent, as there are studies in which researchers could not identify a significant relationship between the elements of corporate governance and the financial performance expressed by various economic indicators, or their results show a negative relationship between variables
— Performancei—expressed by Return on Assets (ROA) and Return on Equity (ROE) indicators; — β0—quantifies all factors that were not taken into account by using an explanatory variable in the analyzed model; — β1, β2, β3, β4, β5, β6, β7, β8, β9—parameters specific to each influencing factor; — εi—reflects the residual term quantifying the influence of random factors or other factors that were not included in the analysis
Summary
The failures that have taken place over time, such as the financial scandals generated mainly by the participants involved in the management of companies, such as Enron, WorldCom, Parmalat, or Gupta, and the bankruptcies caused by the global financial crisis have led to declining the investors’ confidence in the managers’ abilities in leading large corporations. The results in this domain are not consistent, as there are studies in which researchers could not identify a significant relationship between the elements of corporate governance and the financial performance expressed by various economic indicators, or their results show a negative relationship between variables. These differences can have several explanations, the results of the empirical research being largely influenced by the particularities of the model, the variables used, and the size of the analyzed sample [5]
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