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Hanken School of Economics Working Papers, Hanken School of Economics

No 497:
Corporate Governance Mechanisms and Firm Performance: Evidence from Finland

Alexander von Nandelstadh and Matts Rosenberg ()

Abstract: This paper examines the association between corporate governance attributes and firm performance of Finnish firms during 1990 Ė 2000. The empirical results suggest that corporate governance matters for firm performance. First, univariate test results indicate that firms characterized by a high (efficient) level of corporate governance have delivered greater stock returns, are higher valued based on the measure of Tobinís Q, and exhibit higher ratios of cash flow to assets, on average, in comparison to their counterparts characterized by a low (inefficient) level of corporate governance. Second, controlling for a number of well-known determinants of stock returns, we find evidence that firms categorized by inefficient corporate governance have delivered inferior returns to shareholders during the investigation period. Finally, after controlling for several common determinants of firm value, we find that firms characterized by efficient corporate governance have been valued higher during the investigation period, measured by Tobinís Q.

Keywords: Corporate governance mechanisms; Agency costs; Firm performance; (follow links to similar papers)

28 pages, May 19, 2003

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