IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Governance Structures, Efficiency, and Firm Profitability

  • Erik Lehmann

    ()

  • Jürgen Weigand
  • Susanne Warning

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 profitability. 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). This non -parametric linear programming technique considers both multiple in- and outputs. Based on the concept of pareto efficiency, it computes an efficiency score where the associated weights of the inputs and outputs are determined endogenously. 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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: ftp://papers.econ.mpg.de/egp/discussionpapers/2004-22.pdf
Download Restriction: no

Paper provided by Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group in its series Papers on Entrepreneurship, Growth and Public Policy with number 2004-22.

as
in new window

Length: 40 pages
Date of creation: May 2004
Date of revision:
Handle: RePEc:esi:egpdis:2004-22
Contact details of provider: Postal: Kahlaische Strasse 10, D-07745 Jena
Phone: +49-3641-68 65
Fax: +49-3641-68 69 90
Web page: http://www.econ.mpg.de/

More information through EDIRC

Order Information: Web: http://www.econ.mpg.de/english/research/EGP/discuss.php Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Leech, D. & Leahy, J., 1989. "Ownership Structure, Control Type Classifications And The Performance Of Large British Companies," The Warwick Economics Research Paper Series (TWERPS) 345, University of Warwick, Department of Economics.
  2. Charles P. Himmelberg & R. Glenn Hubbard & Darius Palia, 2000. "Understanding the Determinants of Managerial Ownership and the Link Between Ownership and Performance," NBER Working Papers 7209, National Bureau of Economic Research, Inc.
  3. Clifford G. Holderness, 2003. "A survey of blockholders and corporate control," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 51-64.
  4. Marco Bigelli & Vikas Mehrotra & Randall Morck & Wayne Yu, 1998. "Changes in Management Ownership and the Valuation Effects of Equity Offerings," Journal of Management and Governance, Springer, vol. 2(4), pages 297-309, December.
  5. Jerry G. Thursby, 2000. "What Do We Say about Ourselves and What Does It Mean? Yet Another Look at Economics Department Research," Journal of Economic Literature, American Economic Association, vol. 38(2), pages 383-404, June.
  6. Hermalin, Benjamin E & Weisbach, Michael S, 1998. "Endogenously Chosen Boards of Directors and Their Monitoring of the CEO," American Economic Review, American Economic Association, vol. 88(1), pages 96-118, March.
  7. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation : An empirical analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 293-315, January.
  8. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
  9. Andrei Shleifer & Robert W. Vishny, 1995. "A Survey of Corporate Governance," Harvard Institute of Economic Research Working Papers 1741, Harvard - Institute of Economic Research.
  10. Stewart C. Myers, 2001. "Capital Structure," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 81-102, Spring.
  11. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
  12. Klette, T.J., 1998. "Market Power, Scale Economies and Productivity: Estimates from a Panel of Establishment Data," Memorandum 15/1998, Oslo University, Department of Economics.
  13. Seiford, Lawrence M. & Thrall, Robert M., 1990. "Recent developments in DEA : The mathematical programming approach to frontier analysis," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 7-38.
  14. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
  15. Wald, John K, 1999. "How Firm Characteristics Affect Capital Structure: An International Comparison," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 22(2), pages 161-87, Summer.
  16. Green, Alison & Mayes, David, 1991. "Technical Inefficiency in Manufacturing Industries," Economic Journal, Royal Economic Society, vol. 101(406), pages 523-38, May.
  17. Michael Jensen, 2001. "Value Maximisation, Stakeholder Theory, and the Corporate Objective Function," European Financial Management, European Financial Management Association, vol. 7(3), pages 297-317.
  18. Erik Lehmann & Juergen Weigand, 2000. "Does the Governed Corporation Perform Better? Governance Structures and Corporate Performance in Germany," CoFE Discussion Paper 00-05, Center of Finance and Econometrics, University of Konstanz.
  19. David Scharfstein, 1988. "Product-Market Competition and Managerial Slack," RAND Journal of Economics, The RAND Corporation, vol. 19(1), pages 147-155, Spring.
  20. Hariolf Grupp, 1997. "External Effects as a Microeconomic Determinant of Innovation Efficiency," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 4(2), pages 173-188.
  21. N Dryden & Stephen Nickell & D Nicolitsas, 1996. "What Makes Firms Perform Well?," CEP Discussion Papers dp0308, Centre for Economic Performance, LSE.
  22. Short, Helen, 1994. " Ownership, Control, Financial Structure and the Performance of Firms," Journal of Economic Surveys, Wiley Blackwell, vol. 8(3), pages 203-49, September.
  23. Patibandla, Murali, 1998. "Structure, organizational behavior, and technical efficiency: The case of an Indian industry," Journal of Economic Behavior & Organization, Elsevier, vol. 34(3), pages 419-434, March.
  24. Claessens, Stijn & Djankov, Simeon, 1999. "Ownership Concentration and Corporate Performance in the Czech Republic," Journal of Comparative Economics, Elsevier, vol. 27(3), pages 498-513, September.
  25. Grandori, Anna, 1991. "Negotiating efficient organization forms," Journal of Economic Behavior & Organization, Elsevier, vol. 16(3), pages 319-340, December.
  26. Hansmann, Henry, 1988. "Ownership of the Firm," Journal of Law, Economics and Organization, Oxford University Press, vol. 4(2), pages 267-304, Fall.
  27. Beni Lauterbach & Alexander Vaninsky, 1999. "Ownership Structure and Firm Performance: Evidence from Israel," Journal of Management and Governance, Springer, vol. 3(2), pages 189-201, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:esi:egpdis:2004-22. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kerstin Schück)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.