Impact Of Corporate Governance On Firm Performance:Investigation On The Underlying Mechanisms And Boundary Conditions

The thesis aims to investigate the impact of corporate governance（CG）on firm performance considering the underlying mechanisms and boundary conditions.CG plays two main roles to enhance firm performance;the role of controlling and accountability which is a strategy designed to monitor management and improve company performance;and motivational role,that is,to provide mechanisms that encourage managers to create and maintain corporate competition,thereby increasing performance.The Chinese CG structures are having unique characters relating to these roles,which are characterized by high concentration,high involvement of the state,and dual board structure.Specifically,the study objectives are to examine: the relation between internal corporate governance（both board and ownership structures）and firm performance,whether and how managerial overconfidence interacts with CG to influence firm performance;indirect effect of CG on firm performance through firm’s innovation capacity mediation,and how managerial behavior moderates the effect of innovation investment on firm performance in Chinese listed firms.To align these unique Chinese CG characters and the study objectives,the study used multiple theoretical approaches（Agency,Stewardship,and Resource dependence theories）.The study used panel data of 11,634 samples of Chinese listed firms from 2010-2018.To test and analysis,the proposed hypotheses the study employed system GMM model to estimate the dynamic impact of internal CG on firm performance,and to estimate the influencing role of managerial behavior in CG and firm performance relationship,and used hierarchical regression model to test the mediating role of innovation investment in the relationship of CG and firm performance,and moderation role of managerial behavior in the relationship between innovation investment and performance.The study found several supportive evidences: regarding the impact of internal CG mechanisms on firm performance,we found a positive impact of ownership concentration;state ownership,and managerial ownership on firm performance;in addition,dual leadership has a negative impact on firm performance of Chinese listed firms.The empirical results also show managerial overconfidence negatively influences the internal CG and firm performance relationships（board independence,dual leadership,and ownership concentration）.With regards to external CG mechanisms,the findings are inconsistent;managerial overconfidence moderates the impact of debt financing and market-based firm performance,and negatively influences the relation between debt and operational firm performance.Regards to the mediating role of the innovation capacity in the relationship between CG mechanisms and firm performance;the study found to support the mediation role of innovation investment in between CG measured by ownership concentration,debt financing,and product market competition,and firm performance.Furthermore,our finding also showed that managerial overconfidence moderates the impact of innovation investment on firm performance.These findings have several contributes: first,the study extends the literature on the relationship between CG and a firm’s performance by using the Chinese CG structure.Second,this study provides evidence that how managerial behavioral bias interacts with CG mechanisms to affect firm performance,which has not been studied in previous literature.Third,this study found how the innovation capacity of firms mediates the relationship of CG mechanisms and firm performance,which has been given little attention in previous literature.Therefore,the results of this thesis contribute to the theoretical perspective by providing an insight into the influencing role of managerial behavior and innovation capacity of firms’ in the relationship between CG practices and firm performance in an emerging markets economy.Hence,as the Chinese special CG structure different from those of developed market economy,this study’s empirical result provides important managerial implications for the practitioners and is important for policymakers seeking to improve company governance systems.