Managerial ownership, board independence and firm performance

Research output: Contribution to journalArticle

Abstract

Purpose The extant literature reports mixed and inconclusive findings concerning the relationship between corporate governance mechanisms and firm performance. To provide incremental insight, this paper aims to investigate whether the bi-directional relationships among managerial ownership, board independence and firm performance are determined. Design/methodology/approach This paper uses a data set consisting of 9,302 firm-year observations of Australian listed companies during 2005-2015 and a three-stage least squares simultaneous equation model to test the bi-directional relationships. Findings The results indicate that both managerial ownership and board independence inversely affect firm performance and vice versa. In addition, board independence is negatively correlated with managerial ownership and vice versa. Originality/value This study provides additional evidence by using the convergence-of-interests hypothesis vis-a-vis the entrenchment hypothesis to examine the relationship between managerial ownership and firm performance, and tests the association of board independence and firm performance using the explanation of agency theory vis-a-vis stewardship theory.

Original languageEnglish
Pages (from-to)203-220
Number of pages18
JournalAccounting Research Journal
Volume32
Issue number2
DOIs
Publication statusPublished - 1 Jul 2019

Cite this

@article{bc79530656ba4d388bb88fa935fd3716,
title = "Managerial ownership, board independence and firm performance",
abstract = "Purpose The extant literature reports mixed and inconclusive findings concerning the relationship between corporate governance mechanisms and firm performance. To provide incremental insight, this paper aims to investigate whether the bi-directional relationships among managerial ownership, board independence and firm performance are determined. Design/methodology/approach This paper uses a data set consisting of 9,302 firm-year observations of Australian listed companies during 2005-2015 and a three-stage least squares simultaneous equation model to test the bi-directional relationships. Findings The results indicate that both managerial ownership and board independence inversely affect firm performance and vice versa. In addition, board independence is negatively correlated with managerial ownership and vice versa. Originality/value This study provides additional evidence by using the convergence-of-interests hypothesis vis-a-vis the entrenchment hypothesis to examine the relationship between managerial ownership and firm performance, and tests the association of board independence and firm performance using the explanation of agency theory vis-a-vis stewardship theory.",
keywords = "Australia, Firm performance, Corporate governance, Board independence, Managerial ownership, CORPORATE GOVERNANCE MECHANISMS, MULTIPLE-AGENCY CONFLICTS, EXECUTIVE-COMPENSATION, OPERATING PERFORMANCE, REGRESSION-ANALYSIS, MARKET VALUATION, STOCK OWNERSHIP, DIRECTORS, IMPACT, SIZE",
author = "Shan, {Yuan George}",
year = "2019",
month = "7",
day = "1",
doi = "10.1108/ARJ-09-2017-0149",
language = "English",
volume = "32",
pages = "203--220",
journal = "Accounting Research Journal",
issn = "1030-9616",
publisher = "Emerald Group Publishing Limited",
number = "2",

}

Managerial ownership, board independence and firm performance. / Shan, Yuan George.

In: Accounting Research Journal, Vol. 32, No. 2, 01.07.2019, p. 203-220.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Managerial ownership, board independence and firm performance

AU - Shan, Yuan George

PY - 2019/7/1

Y1 - 2019/7/1

N2 - Purpose The extant literature reports mixed and inconclusive findings concerning the relationship between corporate governance mechanisms and firm performance. To provide incremental insight, this paper aims to investigate whether the bi-directional relationships among managerial ownership, board independence and firm performance are determined. Design/methodology/approach This paper uses a data set consisting of 9,302 firm-year observations of Australian listed companies during 2005-2015 and a three-stage least squares simultaneous equation model to test the bi-directional relationships. Findings The results indicate that both managerial ownership and board independence inversely affect firm performance and vice versa. In addition, board independence is negatively correlated with managerial ownership and vice versa. Originality/value This study provides additional evidence by using the convergence-of-interests hypothesis vis-a-vis the entrenchment hypothesis to examine the relationship between managerial ownership and firm performance, and tests the association of board independence and firm performance using the explanation of agency theory vis-a-vis stewardship theory.

AB - Purpose The extant literature reports mixed and inconclusive findings concerning the relationship between corporate governance mechanisms and firm performance. To provide incremental insight, this paper aims to investigate whether the bi-directional relationships among managerial ownership, board independence and firm performance are determined. Design/methodology/approach This paper uses a data set consisting of 9,302 firm-year observations of Australian listed companies during 2005-2015 and a three-stage least squares simultaneous equation model to test the bi-directional relationships. Findings The results indicate that both managerial ownership and board independence inversely affect firm performance and vice versa. In addition, board independence is negatively correlated with managerial ownership and vice versa. Originality/value This study provides additional evidence by using the convergence-of-interests hypothesis vis-a-vis the entrenchment hypothesis to examine the relationship between managerial ownership and firm performance, and tests the association of board independence and firm performance using the explanation of agency theory vis-a-vis stewardship theory.

KW - Australia

KW - Firm performance

KW - Corporate governance

KW - Board independence

KW - Managerial ownership

KW - CORPORATE GOVERNANCE MECHANISMS

KW - MULTIPLE-AGENCY CONFLICTS

KW - EXECUTIVE-COMPENSATION

KW - OPERATING PERFORMANCE

KW - REGRESSION-ANALYSIS

KW - MARKET VALUATION

KW - STOCK OWNERSHIP

KW - DIRECTORS

KW - IMPACT

KW - SIZE

U2 - 10.1108/ARJ-09-2017-0149

DO - 10.1108/ARJ-09-2017-0149

M3 - Article

VL - 32

SP - 203

EP - 220

JO - Accounting Research Journal

JF - Accounting Research Journal

SN - 1030-9616

IS - 2

ER -