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The impact of corporate governance on firm value: Understanding the role of strategic change

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  • Bagh, Tanveer
  • Hunjra, Ahmed Imran
  • Corbet, Shaen

Abstract

This study explores the impact of corporate governance practices on firm value and examines the moderating role of strategic change within publicly traded US companies. Utilising a comprehensive sample of 1,827 firms, we employ dynamic panel two-step Generalised Method of Moments (GMM) and high-dimensional fixed-effect methodologies to analyse these relationships robustly. Our findings indicate that robust corporate governance significantly enhances firm value, and strategic change initiatives further strengthen this effect. By leveraging Bloomberg’s governance disclosure data, we construct an index differentiating between high and low levels of governance disclosure. The results demonstrate that firm value significantly improves when corporate governance disclosures exceed industry and year-adjusted averages. This research contributes to research surrounding corporate governance and firm valuation, providing critical insights designed to enhance organisational performance and shareholder value through effective governance and strategic agility.

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  • Bagh, Tanveer & Hunjra, Ahmed Imran & Corbet, Shaen, 2025. "The impact of corporate governance on firm value: Understanding the role of strategic change," International Review of Economics & Finance, Elsevier, vol. 103(C).
    • Handle: RePEc:eee:reveco:v:103:y:2025:i:c:s1059056025006355
    DOI: 10.1016/j.iref.2025.104472
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    Keywords

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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M14 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Corporate Culture; Diversity; Social Responsibility
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development

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