Does “Good” Corporate Governance Help in a Crisis? The Impact of Country‐ and Firm‐Level Governance Mechanisms in the <scp>E</scp>uropean Financial Crisis
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Bibliographic record
Abstract
Abstract Manuscript Type Empirical Research Question/Issue We examine the effects of firm‐ and country‐level “good” corporate governance prescriptions on firm performance before and during the recent financial crisis, using a large sample of 1,197 firms across 26 European countries. Research Findings/Insights We propose a contextualized agency perspective suggesting that firm‐ and country‐level good governance prescriptions designed to assure managerial oversight may not hold in a financial crisis. This is because firms can benefit from broadening managerial discretion so as to facilitate the exercise of initiative and decisive leadership. Overall, our firm‐ and country‐level findings support this argument. In a crisis, CEO duality is associated with better performance. We also find that the use of incentive compensation and the existence of a wedge between ownership and control rights negatively impacts on firm performance in a crisis. Hierarchical linear modeling shows that 25 percent of the heterogeneity in firm performance is among countries, indicating the importance of including country‐level institutions in our analyses. In a crisis, we find that the general quality of the legal system and creditor rights protection are positively related to firm performance, but protection for equity investors is not. Theoretical/Academic Implications The findings challenge the universality of good governance prescriptions and contribute to the growing body of work proposing that the efficacy of governance mechanisms may be contingent upon organizational and environmental circumstances. Practitioner/Policy Implications The study offers insights relevant to policy and practitioner communities, showing that governance mechanisms operate differently in crisis and non‐crisis periods. The tendency to respond to a crisis with more stringent rules may be counterproductive since such measures may compromise executives' ability to respond appropriately to systemic shocks. Practitioners are encouraged to optimize rather than maximize their governance choices.
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Full frame distilled prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. Learned from the 10,348 direct Codex labels and 10,348 direct Gemma labels. Candidate is the union of thresholded teacher heads; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels or direct frontier model labels.
Codex and Gemma teacher scores by category
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.002 | 0.001 |
| Meta-epidemiology (narrow) | 0.001 | 0.000 |
| Meta-epidemiology (broad) | 0.001 | 0.000 |
| Bibliometrics | 0.000 | 0.002 |
| Science and technology studies | 0.000 | 0.000 |
| Scholarly communication | 0.000 | 0.005 |
| Open science | 0.002 | 0.000 |
| Research integrity | 0.000 | 0.001 |
| Insufficient payload (model declined to judge) | 0.000 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from it