Scandinavian Working Papers in Economics

Working Papers,
Hanken School of Economics

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

Alexander von Nandelstadh and Matts Rosenberg ()
Additional contact information
Alexander von Nandelstadh: Swedish School of Economics and Business Administration, Postal: Arkadiankatu 22, P.O.B. 479; FIN 00101 Helsinki, Finland
Matts Rosenberg: Swedish School of Economics and Business Administration, Postal: Arkadiankatu 22, P.O.B. 479; FIN 00101 Helsinki, Finland

Abstract: This paper examines the association between corporate governance attributes and firm performance of Finnish firms during 1990 – 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 Tobin’s 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 Tobin’s Q.

Keywords: Corporate governance mechanisms; Agency costs; Firm performance

28 pages, May 19, 2003

Price: 10

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