Alfonso Mendoza-Velázquez, Luis Carlos Ortuño-Barba, L. D. Conde-Cortés
{"title":"Corporate governance and firm performance in hybrid model countries","authors":"Alfonso Mendoza-Velázquez, Luis Carlos Ortuño-Barba, L. D. Conde-Cortés","doi":"10.1108/raf-10-2020-0293","DOIUrl":null,"url":null,"abstract":"\nPurpose\nThis paper aims to examine the dynamic nexus between corporate governance (CG) and firm performance in hybrid model countries. It also investigates the effect of horizontal agency conflicts on CG adherence.\n\n\nDesign/methodology/approach\nThis research uses vector autoregression methods and dynamic panels to examine the cross-sectional and longitudinal association between CG and performance, using three CG adherence indexes of transparency, management and board governance. The data set includes annual market and firm performance data from a sample of 93 companies trading in the Mexican stock market for the period 2010–2016.\n\n\nFindings\nThis study finds evidence of dynamic interdependence between CG and firm performance, as well as weak effects of CG adherence on firms’ performance. The adverse effect of increasing return on equity and return on assets (ROE-ROA) gaps on CG adherence, which results from agency conflicts and insider ownership, is likely behind the weak association between CG and firm performance.\n\n\nOriginality/value\nThe findings in this study provide evidence that hybrid systems weaken the nexus between CG and firm performance. The propensity to prefer banking and bond debt to issuing stocks, as indicated by a greater ROE-ROA gap, points to favorable provisions for majority shareholders, adverse normative environments for minority shareholders and a low level of compliance with CG measures, among other problems.\n","PeriodicalId":21152,"journal":{"name":"Review of Accounting and Finance","volume":null,"pages":null},"PeriodicalIF":3.6000,"publicationDate":"2022-02-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"7","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Review of Accounting and Finance","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1108/raf-10-2020-0293","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 7
Abstract
Purpose
This paper aims to examine the dynamic nexus between corporate governance (CG) and firm performance in hybrid model countries. It also investigates the effect of horizontal agency conflicts on CG adherence.
Design/methodology/approach
This research uses vector autoregression methods and dynamic panels to examine the cross-sectional and longitudinal association between CG and performance, using three CG adherence indexes of transparency, management and board governance. The data set includes annual market and firm performance data from a sample of 93 companies trading in the Mexican stock market for the period 2010–2016.
Findings
This study finds evidence of dynamic interdependence between CG and firm performance, as well as weak effects of CG adherence on firms’ performance. The adverse effect of increasing return on equity and return on assets (ROE-ROA) gaps on CG adherence, which results from agency conflicts and insider ownership, is likely behind the weak association between CG and firm performance.
Originality/value
The findings in this study provide evidence that hybrid systems weaken the nexus between CG and firm performance. The propensity to prefer banking and bond debt to issuing stocks, as indicated by a greater ROE-ROA gap, points to favorable provisions for majority shareholders, adverse normative environments for minority shareholders and a low level of compliance with CG measures, among other problems.