Corporate board and firm performance: A data envelopment analysis (DEA) of Italian listed companies

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Abstract

This study aims to examine the effectiveness of corporate governance mechanisms by analysing the influence of corporate board structure on firm performance. A sample of 224 non-financial publicly traded Italian firms is selected to test the proposed research hypotheses and evaluate the firm’s efficiency by adopting a data envelopment analysis (DEA) approach. The findings show that corporate governance mechanisms are crucial in the performance of Italian publicly listed firms. The results show that the inclines and declines in DEA efficiency rankings are associated with the characteristics of the corporate boards. Additionally, many firms show a sub-optimal level of efficiency, as they do not operate at an optimal scale with respect to the efficiency frontier. This study represents an additional source of useful information for managers and stock investors because the DEA approach is a diagnostic tool for distinguishing between more and less efficient firms with respect to corporate governance mechanisms. This study contributes to the existing body of knowledge by providing a strategic framework to explore the board-performance relationship while applying the novel efficiency model.

Keywords: Corporate Governance, Firm Performance, Efficiency Frontier, Data Envelopment Analysis

Authors’ individual contribution: Conceptualization — F.D.L. and S.M.; Methodology — A.R.; Validation — S.M.; Formal Analysis — H.M. and A.R.; Investigation — S.M.; Data Curation — H.M.; Writing — Original Draft — H.M. and A.R.; Writing — Review & Editing — F.D.L.; Supervision — F.D.L.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G34, M12, M14

Received: 05.11.2021
Accepted: 17.01.2022
Published online: 18.01.2022

How to cite this paper: De Luca, F., Migliori, S., Muhammad, H., & Rapposelli, A. (2021). Corporate board and firm performance: A data envelopment analysis (DEA) of Italian listed companies [Special issue]. Corporate Ownership & Control, 19(1), 327–340. https://doi.org/10.22495/cocv19i1siart9