Efficient Governance Structures, Corporate Investment, and Profitability

18 Pages Posted: 26 Aug 2002

See all articles by Erik E. Lehmann

Erik E. Lehmann

University of Augsburg - Faculty of Business and Economics

Susanne Warning

University of Augsburg

Jürgen Weigand

Wissenschaftliche Hochschule fuer Unternehmensfuehrung (WHU) Koblenz

Abstract

Using a panel data set of 361 German corporations for the period 1991 to 1996 we test the hypothesis that firms with more efficient governance structures have higher profitabilities. To determine efficiency we compare firms with respect to ownership concentration, the identity of owners, capital structure, investment and firm growth by a multi-input/multi-output Data Envelopment Analysis (DEA). The DEA efficiency scores are then used as explanatory variables in panel data regressions of profitability. Our main finding is that the efficiency scores indeed contribute significantly to explaining profitability differences between firms, even after controlling for industry effects and unobserved systematic firm effects.

JEL Classification: G3, L1

Suggested Citation

Lehmann, Erik E. and Warning, Susanne and Weigand, Jürgen, Efficient Governance Structures, Corporate Investment, and Profitability. GEABA Discussion Paper No. 02-07; EFA 2002 Berlin Meetings Discussion Paper. Available at SSRN: https://ssrn.com/abstract=302411 or http://dx.doi.org/10.2139/ssrn.302411

Erik E. Lehmann (Contact Author)

University of Augsburg - Faculty of Business and Economics ( email )

Universitätsstr. 16
Augsburg, 86135
Germany

Susanne Warning

University of Augsburg ( email )

University street
Augsburg, 86139
Germany

Jürgen Weigand

Wissenschaftliche Hochschule fuer Unternehmensfuehrung (WHU) Koblenz ( email )

Burgplatz 2
Vallendar, 56179
Germany

HOME PAGE: http://www.whu.edu/mikro

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