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Corporate governance and financial performance: an international approach

Author

Listed:
  • Gérard Hirigoyen

    (UB - Université de Bordeaux)

  • Thierry Poulain-Rehm

    (ULR - La Rochelle Université)

  • Mohamed Ouiakoub

    (CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine)

Abstract

This study assesses the impact of corporate governance. Governance quality is measured through scores awarded by the social rating agency Vigeo-Eiris, both overall, and with respect to four subdimensions: 'the balance of power and the effectiveness of the board of directors'; 'audit and control mechanisms'; 'commitment to shareholders'; and 'mechanisms to determine executive compensation'. We then evaluate their effect on the financial performance of the company. We analyze a sample of 204 listed companies worldwide, for which scores were collected between 2010-2014. The results of linear and logistical regressions suggest that the overall quality of corporate governance, and two of its dimensions ('commitment to shareholders' and 'mechanisms to determine executive compensation') exert a positive influence on financial performance. The latter is measured as the return on equity, and anticipated value creation (the market-to-book ratio). On the other hand, the dimension relating to the 'balance of power and effectiveness of the board of directors' appears to have no influence.

Suggested Citation

  • Gérard Hirigoyen & Thierry Poulain-Rehm & Mohamed Ouiakoub, 2023. "Corporate governance and financial performance: an international approach," Post-Print hal-05830213, HAL.
    • Handle: RePEc:hal:journl:hal-05830213
    Note: View the original document on HAL open archive server: https://hal.science/hal-05830213v1
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