Knut J. Michelberger


According to the agency theory, a positive relationship between company performance and good corporate governance should exist. A broader study of the author of this paper examines a sample of German stock-listed companies whereas Germany can be seen as one of the most highly regulated countries concerning corporate governance. The overall purpose of the author’s study is to analyze the effect of supervisory board characteristics and procedures on firm performance. Several corporate governance variables such as number of committees, board independency, supervisory board compensation, personal risk liability, etc. are examined regarding their effects on firm performance in terms of firm growth and profitability. Two different approaches were selected: (1) a quantitative data analysis, based on financial figures and corporate governance variables, and (2) a survey of supervisory board members out of this sample. The total sample consists of 128 German stock-listed companies. The financial data are obtained from the financial databases providers ThomsonOne and Morningstar. The corporate governance data are also collected from annual reports and from corporate governance compliance statements. According to the German Corporate Governance Codex (DCGK) each stock-listed company has to explain their compliance with the DCGK rules. Thus, the DCGK represents a benchmark of good corporate governance and allows collecting objective and comparable quantitative data to estimate the corporate governance level. The main data analysis methods are bivariate analysis and tests for statistical differences (t-test), the latter in particular to find differences between groups clustered by their 5-years total shareholder return (TSR) growth resulting in a TSR top-30 group and TSR bottom-30 group. While the fulfilment of good corporate governance standards over all shows no significant effect on firm performance, this paper focusses on the findings that risk aversion in the board room is increasing as a result of governance regulations and that growth outperformers have a lower degree of risk aversion. It is concluded that an own-risk deductible in the D&O insurance policy leads to risk-averse supervisory board behavior and thus to lower TSR growth.

Keywords: Corporate Governance; Supervisory Board; Principal–Agent Theory; Risk Aversion; Firm Performance;

DOI: http://dx.doi.org/10.5755/j01.eis.0.10.16191


Keywords: Corporate Governance; Supervisory Board; Principal–Agent Theory; Risk Aversion; Firm Performance;

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Print ISSN: 1822-8402
Online ISSN: 2335-8831