How corporate governance impacts firm value and innovation

Based on several empirical studies, this work aims to analyse the impact of Corporate Governance on Firm Value and Innovation. Using a sub-group of Standard & Poor’s 350 Europe over the three-year period 2011-2013, our research contributes to a better comprehension of a broad range of governance topics. Founded on the most important pillars of corporate governance codes, and in accordance to literature review, 17 governance provisions have been selected. These variables explain the most important fields of firms governance. Our approach allows us to have an overall corporate governance view through a multivariated model, and at the same time to determine each single variable impact. In this sense, according to the Agency Theory, we have hypothesised the effect of each corporate governance provision on firm value. Consequently, through various econometric panel data analysis each hypothesis have been tested. In particular, the Weighted Least Squares Analysis shows that 10 out of 17 variables significantly impact on Tobin’s Q. Secondly, the Principal Components Analysis has enabled to investigate the effect of corporate governance disposals on firm R&D intensity. In the same way, the model’s results are mainly in line with the initial hypothesis, suggesting significant relationships between the PCs and R&D Investments. Through an analysis of PCs structure, we find that 9 out of 17 original variables affect in a positive way Innovation expenditures, while the only “Institutional Shareholders” has a negative effect.