Does Corporate Governance Affect Firm Value? : Evidence from Europe

Diploma Thesis from the year 2003 in the subject Business economics - Business Management, Corporate Governance, grade: 2,0, Maastricht University (Faculty of Economics and Business Administration), language: English, abstract: Inhaltsangabe:Abstract: This thesis provides evidence that companies showing stronger corporate governance performance are on average also valued higher in terms of Tobins q. This evidence is found using a dataset of 242 of Europes 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 firms 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 Tobins q. The statistical findings are tested in depth for their practical validity in the subsequent Interview with the DWS Investment Group. Inhaltsverzeichnis:Table of Contents: Abstractiii 1.Introduction1 2.An Introduction to Corporate Governance6 2.1The Agency Problem6 2.1.1Transaction Conditions8 2.1.2Incentive Mechanisms10 2.1.3Economic Importance11 2.1.4Intermediate Conclusion12 2.2The Stakeholder Impact on Corporate Governance12 2.2.1Corporate Governance, contractual governance, and work governance13 2.3Culture, ownership concen