Management or market variables in the assessment of corporate performance? Evidence on a bank-based system

Purpose - This paper aims to study the influence of some company-specific characteristics, corporate governance factors and macroeconomic factors on the Portuguese companies’ performance. Design/methodology/approach - To achieve this aim, the authors have used data from 39 Euronext Lisbon companies for the period between 2014 and 2019. The authors used panel data methodology, specifically the generalized method of moments estimation method by Arellano and Bover (1995) and Blundell and Bond (1998). Findings - The results point out that the sign and significance of the determinants of corporate performance change depending on the variable used to measure performance. The Tobin’s Q variable, as a market variable and variable of interest to potential investors, is explained by some corporate governance variables and company-specific factors. Specifically, potential investors are confident in the leadership power of the chief executive office (CEO) and the members of the Board of Directors, which contributes positively to corporate performance. However, the firms’ age has a negative impact on Tobin’s Q. Considering an accounting variable managed internally by the organizations, the results show that return on assets is negatively influenced by leverage, and positively affected by CEO duality, which the manager believes is decisive to maintain performance levels. Originality/value - To the best of the authors’ knowledge, this study is the first to analyze specific characteristics of companies and corporate governance factors, in a specific macroeconomic environment of high dependence on banking, considering the nonlinear effect of company age on company performance.