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This paper examines the joint impact of different governance mechanisms on firm performance. The authors use three proxies for firm performance: Tobin's Q, ROA, and the Fama-French-Carhart Alpha. They employ a large panel data set and specify a simultaneous equations model with empirically validated strong instrumental variables to control for endogeneity and unobserved firm-level heterogeneity. Consistent with the interpretation that firms are in equilibrium, they find that firm performance is unrelated to CEO compensation-performance sensitivity, institutional shareholdings, corporate control variables, and CEO turnover. They find that firms are not in equilibrium with respect to board independence, as increasing board independence results in increases in firm performance (when proxied by Tobin's Q and ROA). No such result is found for Alpha.
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