A multidimensional analysis of corporate governance and firm value

We analyse a number of dimensions of corporate governance practices and the interrelation between them and with firm value for a sample of 160 Brazilian firms between 2011 and 2017. Our analysis is based on a set of 42 corporate governance practices recommended by the codes of good governance. We use principal component analysis to identify a number of corporate governance dimensions. We first identify practices that are most complied with, which are related to transparency and managers' incentives. Our findings confirm that the level of firm adherence to corporate governance practices is positively related to firm value. More interestingly, we find substantial variability among the corporate governance dimensions: while seven of them are positively related to firm value, five dimensions seem to have a negative relationship. We also show that the effectiveness of corporate governance dimensions is contingent on firm characteristics such as ownership concentration, profitability, and size. On the whole, our results bear out the multifaceted nature of corporate governance, such that there are no universal practices which exert unequivocal effects on the value of all firms.