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A multidimensional analysis of corporate governance and firm value

Author

Listed:
  • Isac Freitas Brandão

    (Ciência e Tecnologia do Ceará (IFCE)/Universidade Federal do Ceará)

  • Vicente Crisóstomo

    (Federal University of Ceará)

  • Félix J. López-Iturriaga

    (University of Valladolid)

Abstract

We analyse a number of dimensions of corporate governance practices and the interrelation between them and with firm value for a sample of 160 Brazilian firms between 2011 and 2017. Our analysis is based on a set of 42 corporate governance practices recommended by the codes of good governance. We use principal component analysis to identify a number of corporate governance dimensions. We first identify practices that are most complied with, which are related to transparency and managers’ incentives. Our findings confirm that the level of firm adherence to corporate governance practices is positively related to firm value. More interestingly, we find substantial variability among the corporate governance dimensions: while seven of them are positively related to firm value, five dimensions seem to have a negative relationship. We also show that the effectiveness of corporate governance dimensions is contingent on firm characteristics such as ownership concentration, profitability, and size. On the whole, our results bear out the multifaceted nature of corporate governance, such that there are no universal practices which exert unequivocal effects on the value of all firms.

Suggested Citation

  • Isac Freitas Brandão & Vicente Crisóstomo & Félix J. López-Iturriaga, 2024. "A multidimensional analysis of corporate governance and firm value," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 28(4), pages 985-1016, December.
    • Handle: RePEc:kap:jmgtgv:v:28:y:2024:i:4:d:10.1007_s10997-024-09699-8
    DOI: 10.1007/s10997-024-09699-8
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    More about this item

    Keywords

    Brazil; Codes of good governance; Corporate governance index; Principal component analysis;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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