The impact of Corporate Governance on Financial Performance : The case of Belgian Firms

Abstract

This thesis examines the relationship between corporate governance and financial performance in large Belgian firms. Grounded in agency theory and resource dependence theory, the study focuses on three core governance variables: board size, gender diversity, and ownership independence. While much of the existing literature emphasizes listed or multinational firms, this research contributes a national, context-specific perspective based on unlisted companies. The analysis uses a cross-sectional dataset of 8,267 Belgian firms covering the years 2021 to 2023, drawn from the Belfirst database. Financial performance is measured using Return on Capital Employed (ROCE) and Return on Shareholders’ Funds (ROSF). Governance is assessed through board size (total number of directors and managers), gender diversity (number of women in leadership), and the BvD Independence Indicator (ownership structure). Multiple linear regressions were conducted using averaged financial indicators and relevant control variables such as total assets, solvency ratio, turnover, and current ratio. The results show that the selected governance variables explain only a small portion of the variance in financial performance. Board size was not statistically significant, while gender diversity showed a significant negative association with ROCE. Ownership concentration, as measured by the BvD indicator, did not significantly affect either performance metric. These findings suggest that structural features of governance, while important in theory and regulation, may have limited direct influence on short-term profitability. The study highlights the need for future research to explore deeper, more qualitative aspects of governance and adopt longitudinal or mixedmethod approaches to capture delayed or context-dependent effects. This thesis offers insight into the complexity of governance-performance linkages and encourages a shift from surface-level indicators toward more integrated models of governance analysis.