Firm Value and the Evolution of Corporate Governance Standards in Spain

34 Pages Posted: 6 Oct 2009

Date Written: October 6, 2009


The first generation of studies in corporate governance point out to the causality between governance and performance, but recent empirical research has raised the concern whether this “causality” is driven by observable and unobservable firm-specific characteristics. In this paper, I use panel data fixed effects to control for unobservable firm heterogeneity and show that the causality between governance and firm value is not spurious in the case of publicly-traded Spanish firms. I find that the impact of the quality of governance on firm value is sustained over time and that causality seems to run from governance to firm value. These results are robust to numerous controls for observable firm characteristics. I also examine what are the determinants of governance in the case of Spain. The results show that firm size and future growth opportunities have a positive impact on firms’ quality of governance. As a proxy for the quality of governance, I construct a governance index (GOV-I) for a sample of 113 Spanish public companies for the period between 2003 and 2007.

Keywords: corporate governance, firm value, governance determinants, panel data

JEL Classification: G34

Suggested Citation

Perez de Toledo, Eloisa, Firm Value and the Evolution of Corporate Governance Standards in Spain (October 6, 2009). Available at SSRN: or

Eloisa Perez de Toledo (Contact Author)

MacEwan University ( email )

Rm 5-225K, 10700 104 Avenue
Edmonton, Alberta T5J 2P2
17806333342 (Phone)

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