Corporate governance and firm value: a study on European financial institutions
International Journal of Productivity and Performance Management
ISSN: 1741-0401
Article publication date: 7 December 2021
Issue publication date: 17 May 2023
Abstract
Purpose
The purpose of this paper is to examine the impact of the characteristics of two corporate governance mechanisms, namely, board of directors and ownership structure, on the firm value of European financial institutions.
Design/methodology/approach
Using the market-to-book ratio calculated by the Thomson Reuters Eikon ASSET4 database, this study measures the firm value of 111 financial institutions belonging to 12 European countries listed on the stock exchange during the period 2007–2019. Multivariate regression analysis on panel data is used to estimate the relationship between corporate governance attributes, such as board size, board independence, board gender diversity, ownership concentration and CEO ownership, and the firm value of European financial institutions.
Findings
The empirical results reveal that board gender diversity and CEO ownership are positively related to the firm value, whereas board size and ownership concentration are negatively related. Furthermore, the findings suggest that board independence is insignificantly correlated with the firm value. Regarding the control variables, the results show that financial institutions' size, age and legal system are significant factors in changing the firm value. Nevertheless, financial institutions' leverage and activity sector are not significantly correlated with their value.
Originality/value
This research contributes to the literature by providing the significant links between some corporate governance mechanisms and the firm value of companies from the financial industry, by addressing the information gap for this critical industry in the context of a developed market like Europe.
Keywords
Acknowledgements
The authors would like to thank the Editor and the two anonymous referees of the “International Journal of Productivity and Performance Management” for their insightful comments that have greatly benefitted the paper.
Funding: The author(s) received no financial support for the research, authorship, and/or publication of this article.
Citation
Ben Fatma, H. and Chouaibi, J. (2023), "Corporate governance and firm value: a study on European financial institutions", International Journal of Productivity and Performance Management, Vol. 72 No. 5, pp. 1392-1418. https://doi.org/10.1108/IJPPM-05-2021-0306
Publisher
:Emerald Publishing Limited
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