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The Effects of Corporate Governance on the Relationship between Innovative Efforts and Performance

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  • Johnny Jermias
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    Abstract

    The purpose of this study is to examine the effects of managerial share ownership, CEO duality and board independence on the relationship between innovative efforts and performance. The study is motivated by the observation that despite the widely held belief that innovative efforts are crucial to firms' survival, previous studies were unable to provide any evidence in support of this belief. It addresses this incongruity by focusing on the effects of corporate governance on the relationship between innovative efforts and performance. Specifically, this study predicts and finds that managerial share ownership has a positive effect on this relationship while CEO duality has a negative effect. Contrary to the hypothesis, this study finds that board independence also has a negative effect on the relationship between innovative efforts and performance. This contradictory result is, however, consistent with the managerial-incentive theory, which proposes that inside directors are in a better position than outside directors to motivate managers to undertake profitable projects because they have superior access to firms' specific information.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/09638180701707045
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal European Accounting Review.

    Volume (Year): 16 (2007)
    Issue (Month): 4 ()
    Pages: 827-854

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    Handle: RePEc:taf:euract:v:16:y:2007:i:4:p:827-854

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    Cited by:
    1. Cedomir Ljubojevic & Gordana Ljubojevic & Nina Maksimovic, 2013. "Corporate Governance and Competitive Capability in Serbian Companies," MIC 2013: Industry, Science and Policy Makers for Sustainable Future; Proceedings of the 14th International Conference, Koper, 21–23 November 2013 [Selected Papers], University of Primorska, Faculty of Management Koper.
    2. Stefanescu Cristina Alexandra, 2011. "Do Corporate Governance “Actors”’ Features Affect Banks’ Value? – Evidence From Romania," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 6(2), pages 136-150, August.

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