Impact of Country-Level Governance and Ownership Concentration on Firm Value in Central Europe

Purpose: The article considers country-level governance factors (legal/regulatory system and financial development) and ownership concentration that impact the value of non-financial firms in Central European nations, specifically by describing a study done in Austria, Czech Republic, Germany, Hungary, Slovenia, and Switzerland. Methodology: A fixed effect panel data regression analysis was applied to a strongly balanced panel data using a collection of six diverse Central European countries' non-financial firms across the sample period of 2010-2020. Results: According to regression analysis, the legal and regulatory system as well as financial development have a positive relationship with firm value. The firm's value rises as the legal and regulatory system improves. Furthermore, the growth of financial markets adds to the firm's value. However, our study reveals a negative relationship between ownership concentration and firm value, which indicates that ownership concentration is too high to allow for effective supervision, implying that more ownership concentration lowers firm value, as the expropriation theory suggests. Originality: The study examines the value of a firm by incorporating both country - and firm-level factors, which broadens the current literature's insight.