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Board Composition, Managerial Ownership, and Firm Performance: An Empirical Analysis

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  • Barnhart, Scott W
  • Rosenstein, Stuart

Abstract

Our objective is to examine the sensitivity of simultaneous equations techniques in corporate governance research. We model Tobin's Q, board composition, and managerial ownership using a three-equation instrumental variables approach, with two specifications and four instruments. We find that the variables are jointly determined. However, results depend strongly on the specification of the model and the instruments. We conclude that results using simultaneous equations methods must be interpreted cautiously, OLS estimates should not be casually dismissed, and that sensitivity analysis is essential when estimating an empirical model whose structure is uncertain. Copyright 1998 by MIT Press.

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  • Barnhart, Scott W & Rosenstein, Stuart, 1998. "Board Composition, Managerial Ownership, and Firm Performance: An Empirical Analysis," The Financial Review, Eastern Finance Association, vol. 33(4), pages 1-16, November.
  • Handle: RePEc:bla:finrev:v:33:y:1998:i:4:p:1-16
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    8. Trabelsi, Mohamed Ali, 2009. "Governance and performance of Tunisian banks," MPRA Paper 76918, University Library of Munich, Germany, revised 2009.
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    14. Marko Simoneti & Aleksandra Gregoric, 2004. "Managerial ownership and corporate performance in Slovenian post-privatisation period," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 1(2), pages 217-241, December.
    15. Wei, Zuobao & Varela, Oscar, 2003. "State equity ownership and firm market performance: evidence from China's newly privatized firms," Global Finance Journal, Elsevier, pages 65-82.
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    18. Drakos, A.A. & Bekiris, F.V., 2010. "Corporate performance, managerial ownership and endogeneity: A simultaneous equations analysis for the Athens stock exchange," Research in International Business and Finance, Elsevier, pages 24-38.
    19. Seifert, Bruce & Gonenc, Halit & Wright, Jim, 2005. "The international evidence on performance and equity ownership by insiders, blockholders, and institutions," Journal of Multinational Financial Management, Elsevier, pages 171-191.
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    21. Chalevas, Constantinos G., 2011. "The Effect of the Mandatory Adoption of Corporate Governance Mechanisms on Executive Compensation," The International Journal of Accounting, Elsevier, pages 138-174.
    22. Ji, Xu (Jane) & Boyle, Glenn, 2011. "New Zealand Corporate Boards in Transition: Composition, Activity and Incentives Between 1995 and 2010," Working Paper Series 4105, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    23. Hayam Wahba, 2014. "Capital structure, managerial ownership and firm performance: evidence from Egypt," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 18(4), pages 1041-1061, November.
    24. Chiung-Ju Liang & Ying-Li Lin & Tzu-Tsang Huang, 2011. "Does Endogenously Determined Ownership Matter on Performance? Dynamic Evidence from the Emerging Taiwan Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, pages 120-133.
    25. Lefort, Fernando & Urzúa, Francisco, 2008. "Board independence, firm performance and ownership concentration: Evidence from Chile," Journal of Business Research, Elsevier, pages 615-622.

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