Abstract

http://ssrn.com/abstract=970986
 
 

References (52)



 
 

Citations (51)



 


 



Endogeneity and the Dynamics of Internal Corporate Governance


M. Babajide Wintoki


University of Kansas - School of Business

James S. Linck


Southern Methodist University

Jeffry M. Netter


University of Georgia - Department of Banking and Finance; University of Georgia Law School

August 4, 2011

Journal of Financial Economics (JFE), Forthcoming

Abstract:     
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.

Number of Pages in PDF File: 55

Keywords: Endogeneity, Corporate Governance, Board Structure, Board Size, Board Independence, Dynamic Panel GMM Estimator

JEL Classification: G32, G34, K22

Accepted Paper Series


Download This Paper

Date posted: March 15, 2007 ; Last revised: March 22, 2012

Suggested Citation

Wintoki, M. Babajide and Linck, James S. and Netter, Jeffry M., Endogeneity and the Dynamics of Internal Corporate Governance (August 4, 2011). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: http://ssrn.com/abstract=970986

Contact Information

Modupe Babajide Wintoki (Contact Author)
University of Kansas - School of Business ( email )
1300 Sunnyside Avenue
Lawrence, KS 66045
United States
James S. Linck
Southern Methodist University ( email )
Cox School of Business
Dallas, TX 75275
United States
214-768-3933 (Phone)
HOME PAGE: http://cox.smu.edu
Jeffry M. Netter
University of Georgia - Department of Banking and Finance ( email )
Terry College of Business
Athens, GA 30602-6253
United States
706-542-3654 (Phone)
HOME PAGE: http://www.terry.uga.edu/finance/facultyprofiles/n
University of Georgia Law School
Athens, GA 30602
United States
Feedback to SSRN


Paper statistics
Abstract Views: 5,125
Downloads: 1,859
Download Rank: 3,883
References:  52
Citations:  51
Paper comments
No comments have been made on this paper

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.625 seconds