Board structure and its impact on share price: Necessary and sufficient conditions in spanish corporate governance
DOI:
https://doi.org/10.24215/23143738e174Keywords:
Corporate governance, independent directors, Good Governance Code of Listed Companies (CBGC), IBEX-35, Share PriceAbstract
This study analyses companies that left the IBEX-35 index between 2011 and 2020, assessing how the possible ambiguity of the “Comisión Nacional del Mercado de Valores” (CNMV) – the Spanish Securities and Exchange Commission–, in the “Principio 11” – Principle 11– of their “Código de Buen Gobierno de las Sociedades Cotizadas” (CBGC) – Good Governance Code of Listed Companies–, might explain the overrepresentation of independent directors and the decline in their stock prices. The research uses a matrix (Castillo, 2017) that classifies companies based on their compliance with the proportionality principle and the recommendation to have a majority of independent directors.
The results reveal that “rushed” restructurings, completed in less than a year to comply with the CBGC, are negatively perceived by investors, leading to stock price declines. In contrast, slower and more "thought through" restructurings tend to generate positive market responses.
These findings are relevant for good Corporate Governance as they emphasize the need to implement changes to the board's composition gradually and strategically, avoiding negative market reactions. Moreover, they highlight the potential impact of ambiguous regulatory interpretations on the stability of publicly listed companies.
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