Corporate Governance and Firm Operating Performance

31 Pages Posted: 1 Oct 2005

See all articles by Lawrence D. Brown

Lawrence D. Brown

Temple University - Department of Accounting

Marcus L. Caylor

Kennesaw State University

Date Written: December 7, 2006

Abstract

Using a unique dataset provided by Institutional Shareholder Services (ISS), we relate 51 governance provisions to firm operating performance as proxied by return on assets and return on equity. We show that seven (six) governance provisions are significantly and positively related to return on assets (equity) using at least two of three econometric approaches. We identify 10 corporate governance provisions that are positively linked to return on assets, return on equity or both using at least two of our three econometric approaches. Nine of the corporate governance provisions we examine have recently been mandated by the three major U.S. stock exchanges but only one of them, nominating committee is comprised solely of independent outside directors, is significantly and positively related to firm operating performance. Our results reveal that the corporate governance reforms recently mandated by the three major U.S. stock exchanges are not more closely linked to firm operating performance than are those not so mandated.

Keywords: Corporate governance, Firm operating performance, U.S. stock exchanges, Nominating committee

JEL Classification: D21, D60, G34, G33, G35, G38, M41

Suggested Citation

Brown, Lawrence D. and Caylor, Marcus L., Corporate Governance and Firm Operating Performance (December 7, 2006). Available at SSRN: https://ssrn.com/abstract=814205 or http://dx.doi.org/10.2139/ssrn.814205

Lawrence D. Brown (Contact Author)

Temple University - Department of Accounting ( email )

Philadelphia, PA 19122
United States

Marcus L. Caylor

Kennesaw State University ( email )

1000 Chastain Road
Kennesaw, GA 30144
United States

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