Preprint Article Version 1 Preserved in Portico This version is not peer-reviewed

The Board Model Corporate Governance Mechanism and Financial Performance of Non-financial Listed Chinese Firms

Version 1 : Received: 9 March 2020 / Approved: 10 March 2020 / Online: 10 March 2020 (14:31:50 CET)

How to cite: Kong, Y.; Famba, T.; Chituku-Dzimiro, G.; Huaping, S.; Kurauone, O. The Board Model Corporate Governance Mechanism and Financial Performance of Non-financial Listed Chinese Firms. Preprints 2020, 2020030173 (doi: 10.20944/preprints202003.0173.v1). Kong, Y.; Famba, T.; Chituku-Dzimiro, G.; Huaping, S.; Kurauone, O. The Board Model Corporate Governance Mechanism and Financial Performance of Non-financial Listed Chinese Firms. Preprints 2020, 2020030173 (doi: 10.20944/preprints202003.0173.v1).

Abstract

Corporate governance is widely suggested by economists and regulators as a solution to reduce agency problems and improve firm performance. However previous studies have failed to generate consistent results. Using a dynamic panel system GMM estimator to alleviate endogeneity concerns we determine the effect of corporate board structure on the performance of a panel of 1265 Chinese firms listed on the Shanghai and Shenzhen stock exchanges from 2010 to 2016. We compare the dynamic system GMM estimator to some commonly used estimators; ordinary least squares (OLS), fixed effects (FE) and the dynamic OLS, and show that these estimates are biased due to endogeneity. The dynamic system GMM estimator incorporates the dynamic nature of internal governance choices to provide valid and powerful instruments that address unobserved heterogeneity and simultaneity. Our results show support for the board model corporate governance mechanism. We find that board size is positive and significantly related to both return on assets and total net profit margin. In addition board independence is positive and significantly related to return on assets but insignificantly related to total net profit margin. Duality was found to have a negative but statistically insignificant relation with firm performance.

Subject Areas

Corporate governance; ROA; TNPM; dynamic system GMM; endogeneity; board size; board independence

Comments (0)

We encourage comments and feedback from a broad range of readers. See criteria for comments and our diversity statement.

Leave a public comment
Send a private comment to the author(s)
Views 0
Downloads 0
Comments 0
Metrics 0


×
Alerts
Notify me about updates to this article or when a peer-reviewed version is published.
We use cookies on our website to ensure you get the best experience.
Read more about our cookies here.