Year of Graduation
Financial Architecture and Corporate Performance: Evidence from the US Market
Strategic Corporate Finance
This study is designed to demonstrate that corporate performance depends directly on the entire financial architecture, which is ownership structure, capital structures, corporate control and board of directors structures. The components of these structures are interdependent, and consideration of their interrelation is excessively important. It is demonstrated how the financial design of a company affects its effectiveness through the prism of these constituents. It begins with dividing the US market into several performance strata in accordance with the nature of the data. Then, the influence of each structure over performance is testified and discrepancies in that impact are checked. Afterwards, the main features of different financial architecture structures, which characterize the corporate performance, are determined i.e. it is examined whether a particular financial architecture can be more efficient than another to strive for it. The results show that ownership, capital and the board of directors structures should be analyzed as holistic systems and a consideration of separate impact of structure variables can lead to bias inferences. It is found that financial architecture components influence the performance differently depending on the group of the US non-financial companies. Using the cluster analysis demonstrates that impact more precisely and makes the inference of 6 sustainable types of financial architecture differing also in risk level, industry and size.