Corporate Governance Mechanisms and Their Impact on Managerial Value

Resumen

Previous studies have cast doubts on the effectiveness of the application of corporate governance codes in Continental-European countries, due to their Anglo-Saxon orientation. For this reason, we chose a Continental-European country with an Anglo-Saxon orientated code, such as Spain, and analyse which of the recommendations proposed in the Spanish Olivencia Code have positive effects on the value of the firm. We furthermore use panel data estimation to analyse this relationship as well as the impact on firm's value of other corporate governance related variables, such as the quality of audit reports, the magnitude of directors remuneration, the reporting on director remuneration or the firm size. Results suggest a positive relationship between the variables of execution of good corporate governance practices and the value of the company. There is also evidence that the more transparent the company is and the more favourable audit reports they obtain, the better both the managerial performance and the firm's value. Among the recommendations, it is found that the most relevant aspects are transparency and the quality of the audit report.