We investigate the impact of board's quality as defined by a Score published in a Canadian National Newspaper on the performance of the firm. Based on the current literature, we ranked the boards of 219 Canadian firms in terms of four board characteristics: composition of the board, compensation of board members, shareholder rights, and disclosure. Then, we defined firm performance by using traditional accounting-based measures such as ROI, ROE, EPS, and Market-to-book ratio and value creation-based measures such as EVA(R) and MVA. To test the effects of board's quality on firm performance, we adopted different models of univariate and multivariate statistical analysis.
Our results show no significant relationships between corporate governance and performance when using traditional performance measures, such as ROI, ROE, EPS and Market-to-book. However, they reveal significant links between board's quality and performance when the latter is captured by value performance measures, such as market value added and economic value added.