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The board of directors and firm performance: empirical evidence from listed companies

Alessandro Merendino (Centre for Business in Society, Faculty of Business, Environment and Society, Coventry University Faculty of Business Environment and Society, Coventry, West Midlands, UK)
Rob Melville (Cass Business School, London, UK)

Corporate Governance

ISSN: 1472-0701

Article publication date: 28 March 2019

Issue publication date: 3 June 2019




This study aims to reconcile some of the conflicting results in prior studies of the board structure–firm performance relationship and to evaluate the effectiveness and applicability of agency theory in the specific context of Italian corporate governance practice.


This research applies a dynamic generalised method of moments on a sample of Italian listed companies over the period 2003-2015. Proxies for corporate governance mechanisms are the board size, the level of board independence, ownership structure, shareholder agreements and CEO–chairman leadership.


While directors elected by minority shareholders are not able to impact performance, independent directors do have a non-linear effect on performance. Board size has a positive effect on firm performance for lower levels of board size. Ownership structure per se and shareholder agreements do not affect firm performance.

Research limitations/implications

This paper contributes to the literature on agency theory by reconciling some of the conflicting results inherent in the board structure–performance relationship. Firm performance is not necessarily improved by having a high number of independent directors on the board. Ownership structure and composition do not affect firm performance; therefore, greater monitoring provided by concentrated ownership does not necessarily lead to stronger firm performance.

Practical implications

This paper suggests that Italian corporate governance law should improve the rules and effectiveness of minority directors by analysing whether they are able to impede the main shareholders to expropriate private benefits on the expenses of the minority. The legislator should not impose any restrictive regulations with regard to CEO duality, as the influence of CEO duality on performance may vary with respect to the unique characteristics of each company.


The results enrich the understanding of the applicability of agency theory in listed companies, especially in Italy. Additionally, this paper provides a comprehensive synthesis of research evidence of agency theory studies.



Merendino, A. and Melville, R. (2019), "The board of directors and firm performance: empirical evidence from listed companies", Corporate Governance, Vol. 19 No. 3, pp. 508-551.



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