This study examines the interrelations of three monitoring mechanisms based on ownership structure and board composition. The mechanisms assessed in this study are: institutional ownership, managerial ownership and board independence. Specifically, the study looks to address the question, ‘what relationships, if any, exists in a firms use of these monitoring mechanisms?’ and ‘what association, if any, do these mechanisms have with firm performance?’ This study hypothesizes first that firms substitute between the uses of each monitoring mechanism. In addition, the study hypothesizes that firms choose the level of each monitoring mechanism in an optimal way that maximizes performance. The proposed hypotheses are developed through a theoretical explanation of each monitoring mechanisms and its ability to mitigate agency problems that arise with the diffusion of ownership in the modern corporation. The study further details the expected relationships across each mechanism and firm performance through conceptual and operational models. The study then offers an empirical test of both hypotheses, the results of which do not support the substitution hypothesis, but do support the optimal use hypothesis in regards to the three monitoring mechanisms.
Mallett, David, "Is Corporate Governance Optimally Organized? a Study Examining the Interrelationships Between Ownership Structure and Board Composition As Mechanisms to Monitor Management" (2013). Senior Independent Study Theses. Paper 798.
Bachelor of Arts
Senior Independent Study Thesis
© Copyright 2013 David Mallett