Exploration of the Role of Intellectual Property as a Moderator in the Correlation between Ownership Structure and Corporate Performance

Ching-Wen Tung,Tzu-Tsang Huang,Chiung-Ju Liang

doi:10.12973/ejmste/78631

Abstract

This study is to verify the relationship between ownership structure and corporate performance, as well as the persistence of the relationship, by means of the relevant information of value creation provided by intellectual property. More than four thousand data of Taiwan listed companies during the period of 2002-2011 are analyzed in this research. Dynamic perspective is adopted to develop the persistence of the relationship between ownership structure and corporate performance. Regression results show that potentially non-linear relationship exists in the relationship between ownership and corporate performance. Evidence demonstrates that the impact of ownership on performance is a kind of corporate life cycle function, especially in the maturity stage as well as in the high-tech industry where it is particularly obvious. More importantly, the concept of intellectual property and the ownership mechanism of different industry attributes provide different information about value creation in different life cycle processes through dynamic design approach. For robustness, the measured variables of ownership are further lagged by a period to alleviate potential endogeneity issue. Overall, this study mainly contributes to extending the importance of corporate life cycle, and through this, more finely assessing the effect of ownership and the impact on corporate performance.

Highlights

Global financial crisis and frequent fraud scandals point directly to the importance of corporate governance
To assess the impact of insider ownership on performance across life cycle stages, this study develops the interaction between insider ownership and intellectual property proxies in every stage
Based on corporate life cycle perspective, this study examines the relationship between intellectual property, corporate ownership and corporate performance, and attempts to understand the impact of ownership on corporate performance under the moderating effect of intellectual property proxies

Summary

INTRODUCTION

Global financial crisis and frequent fraud scandals point directly to the importance of corporate governance. Based on the agency theory, Jensen and Meckling (1976) propose the convergence- of-interest hypothesis It suggests that when corporate ownership and management are separated, managers, in the pursuit of maximizing self-interests, may incur perquisite consumption or make sub-optimal decisions for the entire firm that damages. Managers are less likely to make decisions that negatively affect corporate value, the objectives of managers and shareholders will tend to align, and so interests and costs can converge, and the corporate performance will improve and positively affect corporate performance This hypothesis is widely supported by subsequent studies (Demsetz and Villalonga, 2001). Observing the role of different value driving factors of specific intellectual capital in the basic relationship between ownership structure and corporate performance can assist the construction of an intellectual capital model that affects firm’s management decisions, and offer a definitive direction toward firm’s value creation. Based on such a concept, this study further examines on whether the impact of ownership structure, value driving factors of intellectual capital and corporate performance will be different alongside different life cycle stages and across different industries

LITERATURE REVIEW AND RESEARCH HYPOTHESES

Findings

CONCLUSION