Endogeneity and the dynamics of internal corporate governance

• 成果类型: Article
• 署名作者: Wintoki, M. Babajide; Linck, James S.; Netter, Jeffry M.
• 署名单位: University of Kansas; Southern Methodist University; University System of Georgia; University of Georgia
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2012.03.005
• 发表日期: 2012
• 页码: 581-606
• 关键词: Endogeneity; corporate governance; Board structure; BOARD SIZE; Board independence; Dynamic panel GMM estimator

摘要

We use a well-developed dynamic panel generalized method of moments (GMM) estimator to alleviate endogeneity concerns in two aspects of corporate governance research: the effect of board structure on firm performance and the determinants of board structure. The estimator incorporates the dynamic nature of internal governance choices to provide valid and powerful instruments that address unobserved heterogeneity and simultaneity. We re-examine the relation between board structure and performance using the GMM estimator in a panel of 6,000 firms over a period from 1991 to 2003, and find no causal relation between board structure and current firm performance. We illustrate why other commonly used estimators that ignore the dynamic relationship between current governance and past firm performance may be biased. We discuss where it may be appropriate to consider the dynamic panel GMM estimator in corporate governance research, as well as caveats to its use. (C) 2012 Elsevier B.V. All rights reserved.