{"id":2620,"date":"2026-08-17T13:03:09","date_gmt":"2026-08-17T10:03:09","guid":{"rendered":"https:\/\/sites.uwasa.fi\/mfjuva\/?page_id=2620"},"modified":"2026-08-17T13:03:21","modified_gmt":"2026-08-17T10:03:21","slug":"what-is-the-relation","status":"publish","type":"page","link":"https:\/\/sites.uwasa.fi\/mfjuva\/all-issues\/what-is-the-relation\/","title":{"rendered":""},"content":{"rendered":"<h2>What is the Relation (if any) Between a Firm\u2019s Corporate Governance Arrangements and its Financial Performance?<\/h2>\n<p>Multinational Finance Journal, 2016, vol. 20, no. 04, pp. 323\u2013354<br \/>\n<em><a href=\"https:\/\/doi.org\/10.17578\/20-4-2\">https:\/\/doi.org\/10.17578\/20-4-2<\/a> &#8211; an open-access journal article<\/em><\/p>\n<p style=\"align-items: center;gap: 12px;font-weight: bold\"><a href=\"https:\/\/sites.uwasa.fi\/mfjuva\/wp-content\/blogs.dir\/4\/files\/sites\/231\/2025\/02\/MJ0p1cijm98mu14ts1qvo12ehta3dpk4.pdf\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-2383\" src=\"https:\/\/sites.uwasa.fi\/mfjuva\/wp-content\/blogs.dir\/4\/files\/sites\/231\/2026\/07\/download-blue-button-300x89.png\" alt=\"\" width=\"139\" height=\"41\" srcset=\"https:\/\/sites.uwasa.fi\/mfjuva\/wp-content\/blogs.dir\/4\/files\/sites\/231\/2026\/07\/download-blue-button-300x89.png 300w, https:\/\/sites.uwasa.fi\/mfjuva\/wp-content\/blogs.dir\/4\/files\/sites\/231\/2026\/07\/download-blue-button.png 355w\" sizes=\"(max-width: 139px) 100vw, 139px\" \/><\/a><\/p>\n<p><strong>Roberto E. Wessels<\/strong>, <em>University of Groningen, The Netherlands<\/em><\/p>\n<p><strong>Tom Wansbeek<\/strong>, <em>University of Groningen, The Netherlands<\/em><\/p>\n<p><strong>Lammertjan Dam<\/strong>, <em>University of Groningen, The Netherlands<\/em><\/p>\n<p>&nbsp;<\/p>\n<h3><strong>Abstract:<\/strong><\/h3>\n<p>We present a model to test the null hypothesis that firms organize their corporate governance arrangements optimally given the constraints they face. Following the literature, the model rejects the null if the conditional correlation between governance and performance is significantly different from zero. Our model provides a clean test of this hypothesis by controlling for measurement errors in all observed variables and avoiding simultaneous equation biases by casting our model as a reduced-form bivariate equation. We model governance, performance and the constraints on the firm\u2019s investment decisions as latent variables. We estimate of the conditional correlation between our measures of corporate governance and firm financial performance to be statistically speaking equal to zero. This result therefore provides empirical support for the in-equilibrium view of corporate governance arrangements.<\/p>\n<p>&nbsp;<\/p>\n<h3><strong>Keywords:<\/strong><\/h3>\n<p>Corporate governance; optimal firm behavior; endogeneity; structural models; latent variables.<\/p>\n<p>&nbsp;<\/p>\n<h3><strong>Citation (APA):<\/strong><\/h3>\n<p data-start=\"25\" data-end=\"233\">Wessels, R. E., Wansbeek, T., &amp; Dam, L. (2016). What is the relation (if any) between a firm\u2019s corporate governance arrangements and its financial performance? <em data-start=\"185\" data-end=\"220\">Multinational Finance Journal, 20<\/em>(4), 323\u2013354.<\/p>\n<h3><strong>Citation (Harvard):<\/strong><\/h3>\n<p>Wessels, R.E., Wansbeek, T. and Dam, L., 2016. What is the Relation (if any) Between a Firm\u2019s Corporate Governance Arrangements and its Financial Performance? <em data-start=\"423\" data-end=\"454\">Multinational Finance Journal<\/em>, 20(4), pp.323\u2013354.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What is the Relation (if any) Between a Firm\u2019s Corporate Governance Arrangements and its Financial Performance? Multinational Finance Journal, 2016, vol. 20, no. 04, pp. 323\u2013354 https:\/\/doi.org\/10.17578\/20-4-2 &#8211; an open-access journal article Roberto E. Wessels, University of Groningen, The Netherlands Tom Wansbeek, University of Groningen, The Netherlands Lammertjan Dam, University of Groningen, The Netherlands &nbsp; [&hellip;]<\/p>\n","protected":false},"author":621,"featured_media":0,"parent":221,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"_acf_changed":false,"footnotes":""},"class_list":["post-2620","page","type-page","status-publish","hentry"],"acf":[],"_links":{"self":[{"href":"https:\/\/sites.uwasa.fi\/mfjuva\/wp-json\/wp\/v2\/pages\/2620"}],"collection":[{"href":"https:\/\/sites.uwasa.fi\/mfjuva\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/sites.uwasa.fi\/mfjuva\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/sites.uwasa.fi\/mfjuva\/wp-json\/wp\/v2\/users\/621"}],"replies":[{"embeddable":true,"href":"https:\/\/sites.uwasa.fi\/mfjuva\/wp-json\/wp\/v2\/comments?post=2620"}],"version-history":[{"count":1,"href":"https:\/\/sites.uwasa.fi\/mfjuva\/wp-json\/wp\/v2\/pages\/2620\/revisions"}],"predecessor-version":[{"id":2621,"href":"https:\/\/sites.uwasa.fi\/mfjuva\/wp-json\/wp\/v2\/pages\/2620\/revisions\/2621"}],"up":[{"embeddable":true,"href":"https:\/\/sites.uwasa.fi\/mfjuva\/wp-json\/wp\/v2\/pages\/221"}],"wp:attachment":[{"href":"https:\/\/sites.uwasa.fi\/mfjuva\/wp-json\/wp\/v2\/media?parent=2620"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}