Sustainable Causal Interpretation with Board Characteristics: Caveat Emptor

Jong-Min Kim, Chulhee Jun and Hope H. Han
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Jong-Min Kim: Statistics Discipline, University of Minnesota at Morris, Morris, MN 56267, USA
Chulhee Jun: Department of Finance, Ziegler College of Business, Bloomsburg University, Bloomsburg, PA 17815, USA
Hope H. Han: School of Business Administration, Ulsan National Institute of Science and Technology (UNIST), Ulsan 44919, Korea

Sustainability, 2020, vol. 12, issue 8, 1-18

Abstract: The study of a causal interpretation of board and firm characteristics, that is, a hidden dependence relationship on the causal inference among board and firm characteristics, is an important but unaddressed issue in the corporate governance literature. Using diverse advanced statistical methods and focusing on Tobin’s Q, we find that (i) not all board variables previously found to be significant are “robust” to latent variable data analysis, and (ii) those variables that are consistently significant differ markedly in latent structural equation analysis. Our analyses provide researchers interested in board issues with an important caveat: Focusing on the dependence structure of available board variables affected by latent factors may introduce a new horizon in corporate finance.

Keywords: causal inference; board structure; corporate governance; Gaussian copula marginal regression; functional principal component analysis; structural equation modeling; directed acyclic graph; latent variable analysis (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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