The impact of corporate governance on firm performance: panel data evidence from S&P 500 Information Technology

Abstract

AbstractThis research is important for both the academic and business environments due to the extraordinary results obtained. Additionally, the significance of the study is also attributed to the addressed topic, which is intensively studied in the world of corporate finance. The primary aim of this research is to scrutinize a cohort of 66 information and technology (IT) companies, all of which are constituents of the American Standard and Poor’s 500 Index (S&P 500). The study period spans two decades, covering the years 2003–2022. To summarize the outcomes, the analytical framework incorporated linear models with both fixed (fe) and random effects (re), as well as quantile regression models. This study's key outcomes highlight that firm size, sales growth, current ratio, long-term debt to capital, free cash flow, asset turnover and receivable turnover, board meeting frequency, female board representation, chief executive officer age, audit committee independence, and the presence of compensation and nomination committees, alongside a pandemic indicator, positively impact firm performance. Conversely, firm age, dividend payout ratio, effective tax rate, board size, chief executive officer duality, and corporate social responsibility committee presence have negative effects on performance. Also, regarding quantile regressions, CEO duality significantly influences companies with high profitability rates, and companies with low to medium profitability rates are more strongly and negatively influenced by board size. The implications of the core policy in this research focusing on corporate governance will consider certain rules and guidelines regarding financial transparency and protecting shareholders' interests. Additionally, it will take into account the independence of the board of directors and the presence of its committees, as well as ethical leadership practices.