The More the Merrier? The Relationship between Structural Configurations of Corporate Governance and Firm Performance

This study provides insights concerning the effects of corporate governance structures on firm performance, focusing on an initial sample of the 500 most capitalized European firms. We argue that corporate governance is a highly situational and contextual concept underlying an interdependent nature.

Prior studies attempted to empirically verify the theoretical link between specific configurations of governance mechanisms and performance, yet no conclusions could be drawn with regard to the interplay of structural corporate governance arrangements. Against this background we investigate the relationships between the board and audit committee size and meetings in terms of their effect on performance, while taking account of selected firm-specific properties as moderators.

Our results are based on two hierarchical regression models that distinguish between the effects on accounting-based and market-based performance. This differentiation finally allows us to derive theoretical contributions by integrating the implications of principal agency and institutional theory, specifically regarding the influence of shareholder expectations on corporate governance design and effectiveness.