Determinants of Good Governance Practices: The Role of Board Independence

REFC – Spanish Journal of Finance and Accounting.

31 Pages Posted: 12 Aug 2019

See all articles by Álvaro Melón-Izco

Álvaro Melón-Izco

University of La Rioja - Department of Economy and Business

Francisco J. Ruiz-Cabestre

University of La Rioja - Department of Economy and Business

Carmen Ruiz-Olalla

University of La Rioja - Department of Economy and Business

Date Written: August 8, 2019

Abstract

This study contributes to broadening our knowledge of the corporate governance of firms. In particular, we consider board independence as a fundamental variable in the explanation of good governance practices. For this purpose, we analyse the Annual Corporate Governance Reports of the Spanish listed companies on the Continuous Market of the Madrid Stock Exchange during the period 2010-2016. The results for all companies reveal that firm size, ownership dispersion and board independence have a positive relationship with good practices, and the relationship between board independence and good governance practices is moderated by ownership dispersion. When we distinguish between firms that comply with board independence recommendation and those that do not, however, the results differ substantially, in terms of sign, magnitude and significance level. This highlights the importance of board independence in explaining good governance practices.

Keywords: corporate governance, corporate governance codes, good governance practices, firm size, ownership dispersion, board independence

JEL Classification: G34, G38, M40, M48

Suggested Citation

Melón, Álvaro and Ruiz-Cabestre, Francisco Javier and Ruiz, Carmen, Determinants of Good Governance Practices: The Role of Board Independence (August 8, 2019). REFC – Spanish Journal of Finance and Accounting., Available at SSRN: https://ssrn.com/abstract=3434301

Álvaro Melón (Contact Author)

University of La Rioja - Department of Economy and Business ( email )

C/ Ciguena, 60
26004 Logrono
Spain

Francisco Javier Ruiz-Cabestre

University of La Rioja - Department of Economy and Business ( email )

C/ Ciguena, 60
26004 Logrono
Spain

Carmen Ruiz

University of La Rioja - Department of Economy and Business ( email )

C/ Ciguena, 60
26004 Logrono
Spain

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