An empirical study of corporate governance mechanisms and firm performance

In the empirical study of the corporate governance, as different governance mechanisms will affect each other, examining governance mechanisms in an isolated context is not effective. Recently, the mutual relationships between corporate governance mechanisms and firm performances have been a focus of empirical research, but the results were mixed. Combining the previous literatures with Chinese stock market, four key control mechanisms of corporate governance were identified. Then, consider about endogeneity, simultaneous equations model were presented to capture the interrelationships between the four control mechanisms and firm performance. Ordinary least square and two-stage least square estimated the equations with panel data of two exchanges during the period 2002-2004 in a 777 sample of Chinese listed firms. The conclusions are applied to suggest policy implications of China's economic reform.