Financial Performance and Corporate Governance on Firm Value: Evidence from Spain
Abstract
1. Introduction
2. Theoretical Background
2.1. Trade-Off Theory
2.2. Pecking Order Theory
2.3. Signaling Theory
2.4. Agency Theory
2.5. Corporate Governance in SMEs
2.6. Study Framework
3. Methodology
3.1. Data
3.2. Variable Description and Measurement
3.2.1. Dependent Variable: Firm Valuation
3.2.2. Control Variables
3.2.3. Financial Performance
3.2.4. Corporate Governance Variables
3.3. Hypothesis Testing
4. Results and Discussion
4.1. Descriptive Statistics and Correlations
4.2. Cross-Sectional Time Series Fixed Effects Regression Results
5. Conclusions
Funding
Institutional Review Board Statement
Data Availability Statement
Conflicts of Interest
1 | BME: Bolsas y Mercados Españoles. |
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Variables | Measurement |
---|---|
Dependent Variable | |
Tobin’s Q | (Total assets − book value of equity + market value of equity)/total assets |
Control Variables | |
Firm size | Natural logarithm of total assets of the firm |
Listing history | Years listed on the stock exchange |
Independent Variables | |
Financial performance | |
ROE | Net income/Total equity |
ROA | Profit before interest and taxes/Book value of total assets |
CR | Current assets/Current liabilities |
DER | Total liabilities/Shareholders’ equity |
Leverage | Total liabilities relative to total assets |
TATO | Net sales/Total assets |
Solvency | Total equity/Total debt |
Corporate Governance | |
Cross-listing | Equals 1 when the firm is cross-listed internationally; otherwise, it equals 0 |
Auditing firm | Equals 1 if firms appointing one of the Big Four auditing firms. Equals 0 otherwise |
Controlling shareholder | Percentage of the largest shareholder (%) |
Second-largest shareholder | Percentage of the second-largest shareholder (%) |
Board size | Number of directors on the board |
Independent directors | Percentage of independent directors on the board (%) |
Chairperson and CEO duality | A value of 1 indicates that the CEO also serves as the chairperson of the board; 0 indicates otherwise |
Mean | Standard Deviation | Minimum | Maximum | Observation | |
---|---|---|---|---|---|
Control Variables | |||||
Firm size | 17.0322 | 2.1427 | 8.0290 | 21.2646 | 361 |
Listing history | 0.7852 | 0.6703 | 0.0000 | 2.1972 | 227 |
Independent Variables | |||||
ROE | −2.7404 | 1.6890 | −7.4217 | 2.6327 | 198 |
ROA | −3.6264 | 1.4868 | −8.3958 | 1.6572 | 192 |
CR | 5.3975 | 12.389 | 0.0000 | 126.959 | 355 |
DER | 0.5496 | 6.7427 | 0.0000 | 108.600 | 327 |
Leverage | 0.47 | 0.4068 | 0.001 | 5.99 | 359 |
TATO | 0.2046 | 0.4200 | 0.0000 | 5.2600 | 320 |
Solvency | 0.5852 | 1.9966 | −4.6877 | 8.3964 | 351 |
Corporate Governance | |||||
Cross-listing | 0.0083 | 0.0909 | 0.0000 | 1.0000 | 361 |
Auditing firm | 0.5900 | 0.4925 | 0.0000 | 1.0000 | 361 |
Controlling shareholder | 0.5133 | 0.3395 | 0.0000 | 1.0000 | 361 |
Second-largest shareholder | 0.1137 | 0.1085 | 0.0000 | 0.4638 | 361 |
Board size | 6.2709 | 2.9391 | 1.0000 | 14.0000 | 361 |
Independent directors | 0.7637 | 0.3215 | 0.0000 | 1.0000 | 360 |
Chairperson and CEO duality | 0.3158 | 0.4655 | 0.0000 | 1.0000 | 361 |
(1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | (9) | (10) | (11) | (12) | (13) | (14) | (15) | (16) | (17) | ||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Tobin’s Q | Leverage | ROE | ROA | Firm Size | CR | DER | TATO | Solvency | Listing History | Controlling Shareholder | Second-Largest Shareholder | Board Size | Independent Directors | Cross-Listing | Auditing Firm | Chairperson–CEO Duality | ||
(1) | Tobin’s Q | 1 | ||||||||||||||||
(2) | Leverage | −0.0582 | 1 | |||||||||||||||
(3) | ROE | 0.0073 | 0.2404 | 1 | ||||||||||||||
(4) | ROA | 0.0226 | 0.0152 | 0.9389 | 1 | |||||||||||||
(5) | Firm size | −0.6513 | 0.0697 | −0.0682 | −0.1717 | 1 | ||||||||||||
(6) | CR | −0.0390 | −0.1922 | −0.0490 | −0.0064 | 0.0046 | 1 | |||||||||||
(7) | DER | −0.0364 | 0.6750 | 0.2293 | 0.0004 | −0.0284 | −0.4114 | 1 | ||||||||||
(8) | TATO | −0.1196 | 0.4562 | 0.3982 | 0.2787 | −0.2225 | −0.1295 | 0.7297 | 1 | |||||||||
(9) | Solvency | 0.0575 | −0.9674 | −0.2772 | 0.0075 | −0.1458 | 0.1854 | −0.7273 | −0.4687 | 1 | ||||||||
(10) | Listing history | −0.0782 | 0.2804 | 0.1184 | 0.013 | 0.0157 | −0.3771 | 0.4856 | 0.4389 | −0.3127 | 1 | |||||||
(11) | Controlling shareholder | 0.0084 | −0.1209 | 0.0567 | −0.0021 | 0.1313 | 0.1278 | 0.1514 | 0.1485 | 0.0334 | 0.0255 | 1 | ||||||
(12) | Second-largest shareholder | 0.2234 | 0.3584 | 0.0269 | −0.1046 | −0.2192 | −0.0472 | 0.2914 | 0.1667 | −0.3916 | 0.0760 | −0.1700 | 1 | |||||
(13) | Board size | 0.1008 | 0.1116 | 0.0238 | −0.0114 | −0.0705 | 0.1344 | 0.0669 | 0.1233 | −0.1172 | 0.1269 | −0.0863 | 0.1245 | 1 | ||||
(14) | Independent directors | −0.1489 | −0.1183 | 0.0925 | 0.0854 | 0.2043 | −0.0692 | −0.0411 | 0.0072 | 0.0782 | 0.0552 | 0.0976 | −0.2287 | 0.5692 | 1 | |||
(15) | Cross-listing | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | ||
(16) | Auditing firm | 0.0072 | −0.2389 | 0.0759 | 0.0734 | 0.1523 | 0.1917 | −0.2664 | −0.3011 | 0.1733 | 0.0186 | 0.0862 | −0.1864 | 0.0262 | 0.1201 | 0 | 1 | |
(17) | Chairperson–CEO duality | 0.1421 | 0.1995 | 0.0541 | 0.0559 | −0.1565 | 0.0157 | −0.0105 | 0.1021 | −0.1497 | −0.0493 | −0.1006 | 0.3535 | 0.0804 | −0.2069 | 0 | −0.0677 | 1 |
Dependent Variable: Tobin’s Q | FEM 1 | FEM 2 | FEM 3 | FEM 4 | FEM 5 |
---|---|---|---|---|---|
Constant | 12.885 *** | 13.727 *** | 13.050 *** | 12.029 *** | 12.572 *** |
(11.44) | (10.68) | (11.26) | (8.30) | (7.28) | |
Control variable (firm-specific variable) | |||||
Firm size | −0.072 *** | −0.769 *** | −0.768 *** | −0.766 *** | −0.734 *** |
(−10.90) | (−10.17) | (−10.66) | (−9.09) | (−7.86) | |
Listing history | −0.697 | −0.065 | 0.090 | 0.060 | 0.069 |
(−0.79) | (−0.58) | (0.76) | (0.55) | (0.57) | |
Independent variables | |||||
Financial variables | |||||
ROE | 0.497 ** | 0.072 * | 0 | 0.089 * | |
(2.12) | (1.53) | 0 | (1.59) | ||
ROA | −0.501 ** | 0 | 0.766 | ||
(−2.17) | 0 | (1.46) | |||
CR | −0.018 | −0.095 * | −0.077 | ||
(−0.35) | (−1.60) | (−1.25) | |||
DER | −0.098 | −0.0620698 | −0.009199 | ||
(−1.15) | (−0.66) | (−0.10) | |||
Leverage | −0.594 ** | −1.070 *** | −0.151 * | ||
(−2.43) | (−4.41) | (1.60) | |||
TATO | −0.296 *** | −0.461 *** | −0.483 *** | ||
(−3.27) | (−4.01) | (−4.15) | |||
Solvency | −0.605 *** | −1.059 *** | |||
(−2.63) | (−4.93) | ||||
Governance variables | |||||
Cross-listing | 0 | ||||
0 | |||||
Auditing firm | −0.105 | 0.102 | |||
(0.74) | (0.16) | ||||
Controlling shareholder | 0.232 ** | 0.274 ** | |||
(1.93) | (2.14) | ||||
Second-largest shareholder | −0.067 | −0.0009 | |||
(−0.61) | (−0.01) | ||||
Board size | 0.287 | 0.187 | |||
(1.30) | (0.78) | ||||
Independent directors | −0.102 | −0.002 | |||
(−0.76) | (−0.01) | ||||
Chairperson and CEO duality | 0.136 | 0.033 | |||
(0.74) | (0.16) | ||||
No. of firms | 86 | 54 | 54 | 44 | 44 |
No. of observations | 227 | 127 | 126 | 108 | 108 |
Hausman test | 41.86 | 49.34 | 33.97 | 28.17 | 50.35 |
R-sq | 0.618 | 0.696 | 0.718 | 0.713 | 0.676 |
Wald (Chi-sq) | 123.62 | 112.44 | 137.06 | 95.59 | 72.78 |
Variable | Model FEM 5 | ||
---|---|---|---|
Tobin’s Q | Coef | P | SE |
Listing history | 0.0691 | 0.566 | 0.120438 |
Firm size | −0.7345 | 0.000 | 0.0934592 |
ROE | 0.0895 | 0.111 | 0.0562399 |
CR | −0.0770 | 0.2111 | 0.0615767 |
DER | −0.0091 | 0.922 | 0.0935102 |
Leverage | −0.1516 | 0.109 | 0.0946662 |
TATO | −0.4834 | 0.000 | 0.1164236 |
Controlling shareholder | 0.2748 | 0.033 | 0.1286467 |
Second-largest shareholder | −0.00094 | 0.994 | 0.1178343 |
Board size | 0.1872 | 0.438 | 0.2412099 |
Independent directors | −0.0022 | 0.988 | 0.1484875 |
Auditing firm | 0.1020 | 0.625 | 0.2087649 |
Chairperson and CEO duality | 0.0330 | 0.876 | 0.2120663 |
Constant | 12.5729 | 0.000 | 1.728036 |
Hausman test | 50.35 | 0.000 | Prob > Chi2 |
R-sq | 0.6766 | ||
Wald (Chi-sq) | 72.78 | 0.000 | |
No. of observations | 108 | ||
P = Standard Error | |||
Fixed effects | |||
Autocorrelation and heteroscedasticity problem corrected with regression of | |||
Prais–Winsten | |||
Variables in natural logarithm |
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Rodríguez Valencia, L. Financial Performance and Corporate Governance on Firm Value: Evidence from Spain. Int. J. Financial Stud. 2025, 13, 123. https://doi.org/10.3390/ijfs13030123
Rodríguez Valencia L. Financial Performance and Corporate Governance on Firm Value: Evidence from Spain. International Journal of Financial Studies. 2025; 13(3):123. https://doi.org/10.3390/ijfs13030123
Chicago/Turabian StyleRodríguez Valencia, Leslie. 2025. "Financial Performance and Corporate Governance on Firm Value: Evidence from Spain" International Journal of Financial Studies 13, no. 3: 123. https://doi.org/10.3390/ijfs13030123
APA StyleRodríguez Valencia, L. (2025). Financial Performance and Corporate Governance on Firm Value: Evidence from Spain. International Journal of Financial Studies, 13(3), 123. https://doi.org/10.3390/ijfs13030123