Role of monitoring within a good corporate governance structure: Evidence from Australia

Abstract

This study investigates the role of monitoring mechanisms within a corporate governance structures, focusing on top 500 publicly-listed companies in Australia. Specifically, it examines whether different monitoring mechanisms affect firm performance. Previous studies have been conducted to examine various monitoring mechanisms and firm performance. However, none of the have consider the interaction among the monitoring mechanisms when examining the relationship. In management and behavioural researches it is well established that Structural Equation Modelling can handle the problem of interaction among the variables. Therefore, we have decided to use Structural equation modelling to identify the complex inter-relations between the corporate governance monitoring mechanisms. We conclude that there is a possibility of having a substitution or complementary links among monitoring mechanisms which explains why there is no consistent empirical evidence between individual monitoring mechanisms and firm performance.