(Nowy Sacz School of Business – National-Louis University, 2012) San Martin-Reyna, Juan M.; Durán-Encalada, Jorge A.
This paper analyses the influence of ownership, board of directors, and financial leverage
on companies’ performance when these either face, or do not face, profitable growth
opportunities. Towards that end we examined a sample of 83 listed Mexican firms during
the period 2005-2011. The results confirm the relevance of debt and board of directors
in terms of firm market value by showing a negative relationship between performance
and both, board of directors and leverage, in the presence of growth opportunities. In
contrast, the relationship between debt and performance becomes positive when firms
have no profitable investment projects. The results also demonstrate that the relevance
of controlling shareholders on firm value is different when firms have or not growth
opportunities. Therefore, our results show that ownership structure, composition and size
of board and the level of leverage play a dual role on performance (increase or decrease
the firm value) and determinewhether the firms have profitable investment projects.