Does Corporate Governance Affect Firm Value?

Diplomarbeit von Sebastian Schilling

Abstract:

This thesis provides evidence that companies showing stronger corporate governance performance are on average also valued higher in terms of Tobin’s q. This evidence is found using a dataset of 242 of Europe’s largest corporations listed in the FTSE Eurotop 300 index. For each of these corporations, a dataset of over 300 corporate governance rating variables is analysed to establish a detailed overview of a firm’s corporate governance performance. These 300 rating variables result out of a corporate governance standard established by an independent rating agency in cooperation with the largest European institutional investors and in reference to the respective national corporate governance codes of the companies in the sample. The final regression model containing independent score components for Corporate Governance performance and financial performance proxied by ROA represents an R square adjusted of 42 per cent, thereby making the model and the inherent coefficients highly representative. The coefficient of the corporate governance score component suggests that, ceteris paribus, a one point increase in the value of the score component leads on average to a 0.3 point increase in Tobin’s q. The statistical findings are tested in depth for their practical validity in the subsequent Interview with the DWS Investment Group.

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