Does good corporate governance matter? Best practice in Poland

Purpose The purpose of this paper is to investigate the relationship between compliance with corporate governance best practice and corporate performance within Poland. Design/methodology/approach The analysis is based on the regression of corporate governance compliance rating and corporate performance on a sample of Polish public listed companies for years 2004‐2006. Findings The research indicates that complying with corporate governance best practice in Poland is associated with lower return on investment (the whole sample). However, the tendency changes into negative but statistically insignificant for the second and third years, and positive but statistically insignificant when only rated companies are included in the research sample. The relationship between proxy of Tobin's q and corporate governance rating remains statistically insignificant and is negative for the whole sample and positive for first and third year as well as for rating companies. Research limitations/ implications The next step of research should include other performance variables (e.g. operating performance) methodological approaches into the analysis (e.g. event study) to test the relation. Practical implications Compliance with best practice of corporate governance, particularly in a transition country, may incur substantial costs, particularly during the first years of implementing new standards. Additionally, the main area for corporate performance improvement may be, for these countries, rooted in other aspects such as management or marketing, and not corporate governance. Originality/value The paper indicates that implementing corporate governance standards is a complex process in terms of costs, investor activism and companies awareness. Its importance increases along with the development of institutional regime as well as market participants’ skills and experience.