Wintoki, M. Babajide
[Verfasser:in]
;
Linck, James S.
[Sonstige Person, Familie und Körperschaft];
Netter, Jeffry M.
[Sonstige Person, Familie und Körperschaft]
Endogeneity and the Dynamics of Internal Corporate Governance
Anmerkungen:
In: Journal of Financial Economics (JFE), Forthcoming
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments August 4, 2011 erstellt
Beschreibung:
We use a well-developed dynamic panel 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 1991-2003, 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