Substitute and complementary effects of alternate monitoring mechanisms on firm performance

This study examines the relationship between corporate monitoring mechanisms (internal shareholders, external block shareholders, the board and its committees, and external auditors) and their affects on firm performance. This study examines the substitute and complementary effect of monitoring on performance using both accounting and market based measures. Structural equation modelling is used to identify the complex inter-relations between the corporate governance variables. This research found some evidence of weak inconsistent complementary effects on performance. And there is a substitution effect exists between shareholders monitoring with board monitoring and auditors monitoring.