Corporate Governance and Performance: Evidence from Italian Companies

Abstract

The purpose of this paper is to verify the presence and intensity (extent) of the relationship between corporate governance and performance in Italian listed companies by using both accounting and non-accounting performance measures. We extended previous literature in considering all the main aspects of governance (board structure and ownership structure) and all relevant peculiarities of Italian entrepreneurial system (family business, concentrated ownership, State ownership, pyramidal groups). In the first part of the paper, we used regression analysis on a sample of 182 Italian listed companies to find that firm performance was positively related to board size and audit committee's effort and negatively related to leverage, although with a very low coefficient. No particular relationship was highlighted for ownership structure. We tested the consistency of this finding by doing a follow-up analysis between a sub-group of 134 of 2003 sample companies and the same companies in 2007 to verify the stability of the determinants of performance and their relative impact overtime. What we found was that only board size kept its positive relation with performance. Audit committee and leverage lost their relevance in 2007 sample in which the presence of a compensation committee showed a positive impact on performance. From our findings, we can conclude that, according to other studies (Belcredi & Rigamonti [1]), the relationship among ownership and corporate governance structure and firm performance is ambiguous. The ambiguity improves if considering the relationship overtime.

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