Firm Performance: Do Non-Executive Directors Have a Mind of Their Own? Evidence from Uk Panel Data

44 Pages Posted: 21 Feb 2007

See all articles by Roberto Mura

Roberto Mura

University of Manchester - Manchester Business School

Date Written: January 2006

Abstract

I investigate the relation between firm performance, ownership structure and board composition. I use the GMM methodology to control simultaneously for endogeneity of the independent variables and for endogeneity due to fixed effects. I use an original, large, hand-collected panel dataset of UK firms for the period 1991-2001. Results indicate that the direction of causality runs from ownership and board composition to performance. I find a cubic relation between performance and ownership by executive directors. The proportion of non-executives on the board, but not their proportional ownership, is significantly and positively related to firm performance. Finally, I detect a negative relation between performance and blockholding by institutional and non-institutional owners, which suggests that they are not effective monitors.

Keywords: firm performance, ownership structure, corporate governance, endogeneity, GMM, panel data

JEL Classification: G32, G34

Suggested Citation

Mura, Roberto, Firm Performance: Do Non-Executive Directors Have a Mind of Their Own? Evidence from Uk Panel Data (January 2006). Available at SSRN: https://ssrn.com/abstract=676971 or http://dx.doi.org/10.2139/ssrn.676971

Roberto Mura (Contact Author)

University of Manchester - Manchester Business School ( email )

Crawford House
Oxford Road
Manchester, Lancashire M13 9PL
United Kingdom
+44 (0) 161 275 4023 (Fax)

HOME PAGE: http://www.robertomura.com

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