Do Ownership Structure, Political Connections and Executive Compensation Have Multifaceted Effects on Firm Performance? An Alternative Approach

Abstract

This study investigates the multifaceted effects of board characteristics and ownership on firm performance. Using panel data for 130 listed firms over the period 2009-2016 and after applying the SORM-DEA to OLS, quantile and 3SLS regressions. We explore the first empirical evidence showing that board characteristics tend to have multifaceted effects in explaining firm performance. Executive compensation has a positive influence in expounding firm performance. In contrast, political connections have a negative impact on firm performance. Further, the findings indicate that foreign ownership and CEO chair duality are positively related to firm performance. These effects are more pronounced in periods of high oil prices, while foreign ownership and CEO chair duality fail to explain firm performance in a period of low oil price. The results also reveal that CEO educational background has a significant effect on performance in service firms compared with industrial firms. The outcomes of this study provide important implications for investors and policymakers.