Corporate Governance and Firm Performance: Does Capital Structure Matter?

The business community, regulators, and authorities in the capital markets are increasingly acknowledging Corporate Governance (CG) as a critical factor influencing the performance of corporations. Consequently, this study analyses the impact of CG characteristics on firm performance, considering a panel data set of non-financial listed firms in Euronext Lisbon, a small European market-based country, for the period between 2010 and 2022. In addition, we explore whether capital structure mediates the relationship between CG and firm performance. The results show that CG does not consistently affect the performance of firms, because the relationship between CG attributes and firm performance is dependent on the proxy used to measure performance. In addition, our evidence suggests that the moderating effect of leverage on the relationship between CG and performance depends on the variables of performance used. Our results have significant policy implications for listed firms in Portugal, and all those comparable markets as well.