Corporate Governance, Agency Mechanisms, and Stock Value: A PLS-SEM Analysis of the Principal–Agent Framework
DOI:
https://doi.org/10.22399/ijhemas.18Keywords:
Corporate Governance, Principal–Agent Theory, Agency Mechanisms, Firm Performance, Stock Value, PLS-SEM, Structural Equation Modeling, Financial GovernanceAbstract
This study analyzes the relationships between governance mechanisms derived from the principal–agent framework, firm performance, and stock value using a Partial Least Squares Structural Equation Modeling (PLS-SEM) approach. The research examines how incentive alignment, monitoring mechanisms, and corporate governance structures influence organizational performance and how these outcomes affect market valuation. A quantitative explanatory design was employed using reflective constructs representing agency problems, incentives, monitoring practices, corporate governance, firm performance, and stock value. The model was estimated using the SmartPLS algorithm, and the measurement model was evaluated through reliability and validity criteria including outer loadings, composite reliability, and average variance extracted. Structural relationships were assessed using path coefficients and bootstrapping procedures to determine statistical significance. The results indicate that governance mechanisms positively influence firm performance, while organizational performance strongly contributes to stock value. The findings highlight the role of governance structures in reducing agency conflicts, strengthening managerial accountability, and improving strategic decision-making processes. Furthermore, the model demonstrates substantial explanatory power and adequate global fit, supporting the theoretical relationships proposed between governance mechanisms and financial outcomes. These results contribute to understanding how governance systems shape organizational performance and investor perceptions in contemporary corporate environments.
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