Corporate Governance Code Compliance and financial performance: the case of Austrian stock listed companies

Abstract

This article analyzes the correlation between compliance to the Austrian Code of Corporate Governance and financial success of Austrian stock listed companies. It uses a sample of 52 Austrian companies that are listed on the Vienna Stock Exchange and corporate data collected from company publications such as annual reports, financial reports, corporate governance reports and company websites. Three accounting measures – return on assets, return on equity and net profit margin – were chosen in order to proxy the financial performance of a company. The period under review ranges from 2008 to 2016, whereas particular attention is given to the years 2010 to 2016. A corporate governance compliance score has been established on the comply or explain basis and recommendation rules of the Austrian Code of Corporate Governance in order to measure a company’s ability of implementing ‘good’ corporate governance practices. In line with research for other countries, this study finds no statistical evidence that a correlation exists between high compliance to the Austrian Code of Corporate Governance and financial success of companies listed on the Austrian Stock Exchange. The paper highlights the uniqueness of the Austrian Corporate Governance system when compared to other systems and gives arguments why companies comply with corporate governance recommendations.