Endogeneity and the corporate governance - performance relation

Emma L. Schultz; David T. Tan; Kathleen D. Walsh

doi:10.1177/0312896210370079

Endogeneity and the corporate governance - performance relation

Emma L. Schultz, David T. Tan, Kathleen D. Walsh

Research output: Contribution to journal › Article › peer-review

238 Citations (Scopus)

Abstract

The governance-performance literature is characterized by its inability to reach a consensus regarding the nature of the relation. We posit that these inconsistent findings are symptomatic of inadequacies in the econometric techniques employed when adjusting for all forms of endogeneity. To test this, we fit a comprehensive model of performance and governance using a range of econometric techniques. Once a dynamic generalized method of moments (GMM) specification robust to all forms of endogeneity is employed, we observe no causal relation between governance and firm performance, suggesting that apparently significant relations uncovered by pooled ordinary least squares (OLS) and fix-effects models are the result of spurious correlations.

Original language	English
Pages (from-to)	145-163
Number of pages	19
Journal	Australian Journal of Management
Volume	35
Issue number	2
DOIs	https://doi.org/10.1177/0312896210370079
Publication status	Published - Aug 2010

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Endogeneity and the corporate governance - performance relation

Abstract

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