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RELATIONSHIP BETWEEN FIRM OWNERSHIP AND PERFORMANCE: THE MEDIATING ROLE OF INTERNAL GOVERNANCE MECHANISMS

Ngui Kwang Sing, Voon Mung Ling, Ee Yaw Seng, Lim Edith Ai Ling

DOI: 10.22495/cocv5i4c5p6

Abstract

This paper explores the role of selected internal governance mechanisms as mediators of the relationship between ownership and firm performance. Data from 2004 and 2005 was gathered from 177 firms listed on Bursa Malaysia. Structural equation modelling was used as the primary statistical analysis approach. Insiders and blockholders were found to compete for board dominance. Selected internal governance mechanisms mediate the effect of ownership on performance, suggesting that these were used to advance the investment interests of insiders/ blockholders. The paper provides empirical support for the interest-alignment hypothesis, arguing that the use of governance mechanisms that align the interest of managers and shareholders are more effective than monitoring mechanisms.

Keywords: Corporate Governance, Internal Control, Shareholders

How to cite this paper: Sing, N. K., Ling, V. M., Seng, E. Y., Ling, L. E. A. (2008). Relationship between firm ownership and performance: the mediating role of internal governance mechanisms [Special issue]. Corporate Ownership & Control, 5(4-5), 461-470. http://dx.doi.org/10.22495/cocv5i4c5p6

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