This paper examines the relationship between formal compliance with Corporate Governance Code recommendations and the financial performance of 46 Croatian non-financial listed companies from 2020 to 2024. Compliance is measured using the ESGOV index and its ten sub-indices, which capture the presence of formal governance mechanisms. Financial performance is assessed through return on assets (ROA) and Tobin’s Q. The analysis uses LASSO regression to identify the governance dimensions most relevant to performance, while hierarchical cluster analysis groups firms with similar governance patterns. The findings show a statistically significant positive association between the ESGOV index and ROA, but no significant link with market value. However, some sub-indices are significantly related to market value. As the ESGOV index reflects formal compliance rather than governance quality, the results indicate associations rather than causality. Overall, the findings highlight the role of governance frameworks in supporting competitiveness, sustainability, efficiency, and transparency.
Žmuk et al. (Mon,) studied this question.