Corporate governance and performance: A study of listed subsidiaries

Abstract

The study addresses a critical gap in the literature by examining the often-neglected influence of holdings (and sub-holdings) within business groups on the financial performance of listed subsidiaries. It highlights the potential bias introduced in empirical studies that overlook the management and coordination activities of parent companies, particularly when listed subsidiaries are directed by their parents. The research focuses on Italian listed companies, leveraging the regulatory requirements for subsidiaries to disclose the exercise of decision-making power by their parent companies. The methodology involves a descriptive statistical analysis of Italian non-financial listed companies, revealing that a significant proportion are consolidated by controlling entities, and a subset declare themselves directed by their parents. The major findings underscore the importance of considering the relationship between parent and subsidiary boards, the potential impact of directed transactions on financial performance, and the need for nuanced analysis when interpreting corporate governance variables. The study concludes by advocating for improved regulatory disclosure requirements to enhance transparency and address potential biases in future research.