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Meta-frontier and measures of efficiency emphasising optimal corporate governance risk across countries

Walaa Wahid ElKelish (Department of Accounting, University of Sharjah, College of Business Administration, Sharjah, United Arab Emirates)
Panagiotis Zervopoulos (Department of Management, University of Sharjah, College of Business Administration, Sharjah, United Arab Emirates)

Corporate Governance

ISSN: 1472-0701

Article publication date: 19 August 2021

Issue publication date: 21 January 2022

303

Abstract

Purpose

This paper aims to investigate the internal and external determinants of firms’ efficiency and develop optimal corporate governance risk benchmarks for the manufacturing sector across different countries.

Design/methodology/approach

Corporate governance risk data were acquired from Institutional Shareholder Services Europe SA. Data on firms’ efficiency and for explanatory and control variables were taken from the DataStream database. The generalised directional distance function data envelopment analysis (GDDF-DEA) model and its stochastic extension provided corporate efficiency measures and optimal corporate governance benchmarks. The authors used ordinary least squares multiple regression analysis with wild bootstrapping to test the study hypotheses.

Findings

The authors found significant differences between firms’ optimal and actual efficiency input/output variables and corporate governance risks in the manufacturing sector across countries. Internal firm characteristics such as group affiliations, product market competition and insider ownership and external institutional factors such as the legal system, the rule of law, control of corruption, law enforcement and cultural values are vital determinants of firms’ efficiency.

Practical implications

This paper provides valuable guidance to enable corporate managers, regulators and policymakers to enhance firms’ efficiency and corporate governance practices.

Originality/value

This paper develops optimal corporate governance risk benchmarks and identifies the most critical internal and external factors affecting firms’ efficiency in the manufacturing sector in various countries. It also used a novel GDDF-DEA model, with the multi-parametric model for bias correction of efficiency estimator.

Keywords

Citation

ElKelish, W.W. and Zervopoulos, P. (2022), "Meta-frontier and measures of efficiency emphasising optimal corporate governance risk across countries", Corporate Governance, Vol. 22 No. 1, pp. 89-113. https://doi.org/10.1108/CG-09-2020-0414

Publisher

:

Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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