Governance and performance revisited
Governance and performance revisited
By Øyvind Bøhren and Bernt Arne Ødegaard, Norwegian School of Management
Abstract
Using rich and accurate data from Oslo Stock Exchange firms, we find that
corporate governance matters for economic performance, insider ownership matters
the most, outside ownership concentration destroys market value, direct
ownership is superior to indirect, and that performance decreases with
increasing board size, leverage, dividend payout, and the fraction of
non--voting shares. These results persist across a wide range of single-equation
models, suggesting that governance mechanisms are independent and may be
analyzed one by one rather than a bundle. In contrast, our findings depend on
the performance measure used and on the choice of instruments in simultaneous
equations. The lack of significant relationships in tests allowing for
endogeneity may not reflect optimal governance, but rather an underdeveloped
theory of how governance and performance interact.
Keywords: Corporate Governance, Economic
Performance, Simultaneous Equations.
JEL Codes: G3, L22
The paper was published as a chapter in
International Corporate Governance after Sarbanes-Oxley, Paul Ali and
Greg Gregouriu (ed), Wiley, February 2006, pg 27-64.
A preprint version of the chapter is downloadable as a pdf
file