Governance and social responsibility: what factors impact corporate performance in a small banking-oriented country?

Abstract

Purpose: This paper aims to analyze the corporate governance and corporate social responsibility determinants of the Portuguese listed companies’ performance, considering a different point of view by managers, shareholders, and other external stakeholders and investors. Design/methodology/approach: To achieve this aim, we have used a sample of 34 nonfinancial listed companies in Euronext Lisbon between 2015 to 2020. We employed the panel data methodology to test the hypotheses formulated according to the literature review, specifically the Generalized Method of Moments (GMM) system estimation model proposed by Arellano and Bond (1991). Findings: The main results point out that the determinants of corporate performance vary depending on the dependent variable considered. From the managers’ perspective, the existence of an audit committee and expenses with the environment increase costs and reduce results, negatively influencing corporate performance, but the company's maturity adds synergies in resource management and positively influences performance. Shareholders consider that gender diversity and board independence positively influence performance while for external stakeholders and long-term investors, gender diversity and the social responsibility committee harm the performance of Portuguese companies. However, environmental and social expenditures have a positive effect, showing that the market's perception is that, in the long run, it is essential to eradicate poverty and protect the environment. Originality/value: As far as the authors are aware, this study is the first one to analyze corporate governance and corporate social responsibility determinants on the performance of listed Portuguese companies. Our study shows that in a small bankingoriented country there is still a long way to go in terms of increasing social responsibility and governance among different stakeholders. It is essential to promote actions that lead to effective governance and awareness of social responsibility.