Evaluating the impact of compliance with governance recommendations on firm performance: The case of Spain

In this paper, we empirically examine whether higher levels of compliance with the recommendations included in the Spanish Unified Good Governance Code (UGGC) have an impact on firm performance using a unique hand-collected panel data set of 145 listed companies for the research period between 2007 and 2012. We find that, in spite of the increasing compliance trend, there is no conclusive evidence that adherence to the UGGC guidelines is a performance relevant factor. This result seems to be robust, as it holds in the main analysis as well as in all the additional analyses conducted. Therefore, our findings would further support the lack of consensus in this line of research regarding the true impact of compliance with the globally disseminated codes of best corporate governance practices on firm performance. The generally inconclusive findings should suggest to shareholders and stock analysts that high scores on these measures do not necessarily translate into higher performance, despite the notion that “good governance” ought to be beneficial.