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Strategy versus control orientation and firm performance: Evidence from Europe



Objective: The objective of the article is to investigate the relationship between strategy and control in national-level corporate governance (CG) codes impact firm-level financial and strategic performance.

Research Design & Methods: We build on existing CG literature to offer a conceptual matrix showing the evolution of CG codes as they balance strategy and control. We relate the emphasis on strategy versus control at the national level to the firm level for both strategic outcomes as well as more traditional financial measures. Using Compustat data from 12 700 unique firms across 31 countries for the period 1990-2016, we estimate the impact of CG codes on various financial performance measures with multivariate regression and logistics (logit) models.

Findings: We find that there is a positive and significant relationship between higher emphasis on strategy in CG codes and return on assets (ROA). We also find a positive and significant relationship between the former and the probability of paying dividends, investing in research and development (R&D), and spending on capital expenditures (CAPEX).

Implications & Recommendations: Stronger legal institutions associate with a higher emphasis on strategy in CG codes. We suggest that policymakers should refine their CG Codes to focus more on strategy where feasible given our findings. We also recommend strengthening legal institutions, such as rule of law, as this will accelerate the evolution of CG codes from monitoring to strategy.

Contribution & Value Added: Our findings indicate that policymakers should refine their CG codes to emphasize strategy where feasible. In addition, strengthening legal institutions would accelerate the evolution of CG codes.


Corporate Governance, Corporate Governance Codes, Strategy-Control Ratio, Firm performance, Institutions

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Author Biography

Michael Troilo

Dr. Michael Troilo is the Chapman Chair and Professor of International Business at the University of Tulsa. His research interests include entrepreneurship and economic development, innovation, sustainability, business ethics, and the economics of the sports and tourism industries. He earned his PhD from the University of Michigan

Svetlana Orlova

Dr. Svetlana Orlova is an Associate Professor of Finance and International Business at the University of Tulsa. Her research interests include corporate finance and international finance. She earned her PhD at Oklahoma State University.

Miklos Stocker

Dr. Miklos Stocker is Habil. Associate Professor and Head of Institute at the Institute of Strategy and Management of Corvinus University of Budapest, Hungary. His research interests include strategy, business strategy, international new ventures, knowledge management, and sports strategy. He earned his PhD in Management and Business Administration at Corvinus University of Budapest.

Michal Zdziarski

Dr. Michal Zdziarski is an Associate Professor of Strategy and International Business in the Management Faculty at the University of Warsaw. His research interests include strategy, international business, corporate governance, sustainability, and business networks. He earned his PhD at the University of Warsaw.


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