Board efficiency index, government ownership and financial performance of Shanghai stock exchange companies

Purpose This study investigates the impact of a multidimensional board efficiency index (BEI) on firm financial performance (FP) and examines the moderating role of government ownership (GO) in China’s emerging market. It addresses gaps in prior literature by integrating six board attributes into a holistic governance metric and testing the government influence. Design/methodology/approach Using panel data from 1,226 Shanghai Stock Exchange-listed firms (2018–2022), the study employs a system Generalized Method of Moments (GMM) model to mitigate endogeneity. BEI is constructed by synthesizing board size, independence, CEO duality, meeting frequency, political connections and financial expertise. FP is measured via Economic Value-Added Rate and Tobin’s Q. GO is operationalized as a moderating variable, with controls for firm size, leverage, R&D, age and management turnover. Findings BEI significantly enhances FP, validating contingency theory’s governance–performance linkage. However, GO negatively moderates this relationship, attenuating BEI’s efficiency due to socio-political objectives and bureaucratic constraints. Enterprises with high GO exhibit weaker alignment between governance rigor and FP. Robustness checks using alternative performance metrics (ROA and ROE) and fixed-effects models confirm these results. Research limitations/implications The focus on Chinese listed firms limits generalizability to other emerging markets. Unobserved factors, such as regional policy variations or market competition, may further influence governance dynamics. Future studies should explore cross-country comparisons. Originality/value This research contributes by proposing BEI as a novel composite governance measurement, advancing beyond fragmented analyses of board attributes. Providing empirical evidence from China’s hybrid economy, offering policymakers actionable insights to balance state influence with market-driven governance.