Examining the Causal Relationship of Corporate Governance: An Application of Directed Acyclic Graphs

Ownership structure is a central theme in the corporate governance literature and is often thought as an important instrument to reduce the agency problem between shareholders and managers. Research on the determinants and effects of various governance mechanisms typically assumes that these mechanisms operate independently. However, governance mechanisms in theory may be complementary or substitutive in achieving alignment of the interests of shareholders and managers. By simultaneously considering various types of ownership governance mechanisms, this paper applies path analysis model and directed acyclic graphs to explore the causal linkages among ownership mechanisms and corporate performance for a sample of listed firms in Taiwan. The results indicate that the governance effects of institutional holdings on both board holdings and largest external blockholdings are complementary. And, large blockholdings are complements to institutional holdings. However, institutional holdings or large blockholdings substitute managerial holdings in being associated with corporate performance. The findings of this study would be of interest to regulators, investment analysts, and market participants.

並列關鍵字

Corporate governance ； Ownership structure ； Directed acyclic graphs

國際替代計量

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