The board of directors and firm performance: empirical evidence from listed companies

Purpose This study aims to reconcile some of the conflicting results in prior studies of the board structure-firm performance relationship and to evaluate the effectiveness and applicability of agency theory in the specific context of Italian corporate governance practice. Design/methodology/approach This research applies a dynamic generalised method of moments on a sample of Italian listed companies over the period 2003-2015. Proxies for corporate governance mechanisms are the board size, the level of board independence, ownership structure, shareholder agreements and CEO-chairman leadership. Findings While directors elected by minority shareholders are not able to impact performance, independent directors do have a non-linear effect on performance. Board size has a positive effect on firm performance for lower levels of board size. Ownership structure per se and shareholder agreements do not affect firm performance. Originality/value The results enrich the understanding of the applicability of agency theory in listed companies, especially in Italy. Additionally, this paper provides a comprehensive synthesis of research evidence of agency theory studies.