Corporate Governance and Financial Performance: A Multi‐Dimensional Perspective From European Food Firms

Abstract

This study examines how corporate governance and sustainability mechanisms are associated with firm performance in the European food industry, focusing on whether their effects differ across performance dimensions. Using a panel of 602 publicly listed firms from 2014 to 2024 and a dynamic System Generalized Method of Moments (system GMM) approach, the results show that governance mechanisms generate systematic trade‐offs across performance measures. ESG engagement and ISO certifications are negatively associated with operational efficiency, while ISO certifications are positively associated with shareholder profitability. Board‐related governance mechanisms also show heterogeneous effects across ROE, EBITDA margin and PTB. This pattern reflects a governance paradox: practices that strengthen legitimacy, credibility or oversight may also generate coordination, implementation and compliance costs. In contrast, board meeting attendance is the only mechanism consistently associated with improvements in both profitability and operational performance. Overall, governance outcomes vary across performance measures and stakeholders. By analysing multiple governance mechanisms across accounting‐based, operational and market‐based indicators, the study helps explain why prior research reports mixed results. It also contributes to ongoing debates in business ethics by showing that governance and sustainability practices involve trade‐offs rather than uniform benefits. The results suggest that these mechanisms should be assessed across different performance dimensions, rather than through a single metric.