The Impact Of Corporate Governance Quality On The Valuation Of Companies In Regulated Sectors In Peru

Abstract

This study examines the impact of corporate governance quality on firm valuation in regulated sectors in Peru over the period 2015–2025. Regulated industries particularly utilities, energy, telecommunications, and financial services operate under heightened state oversight, political risk exposure, and public accountability requirements. In such environments, governance mechanisms play a critical role in mitigating agency costs, regulatory opportunism, and information asymmetries. Drawing on agency theory, stakeholder theory, and regulatory governance frameworks, this research evaluates whether higher corporate governance quality enhances firm valuation, measured through Tobin’s Q and market-to-book ratios. Using panel data from firms listed on the Bolsa de Valores de Lima (BVL), corporate governance scores are constructed from compliance with the OECD Principles of Corporate Governance and Peru’s Corporate Governance Code. The empirical analysis employs fixed-effects and random-effects panel regressions, two-step system GMM estimations to address endogeneity, and robustness checks with alternative valuation proxies. Control variables include firm size, leverage, profitability, ownership concentration, and regulatory intensity. The results demonstrate a statistically significant and economically meaningful positive relationship between governance quality and firm valuation. Firms in regulated sectors with stronger board independence, disclosure practices, and shareholder protection mechanisms exhibit higher market valuation multiples. The effect is stronger in capital-intensive industries and during periods of regulatory tightening. These findings contribute to the public finance literature by showing how governance mechanisms function as quasi-regulatory complements, reducing political and regulatory risk premiums in emerging markets. Policy implications suggest that strengthening governance enforcement in Peru’s regulated sectors can enhance capital market development, reduce cost of capital, and improve public-sector regulatory effectiveness.