The effects of corporate governance on airline performance: Production and marketing efficiency perspectives

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The effects of corporate governance on airline performance: Production and marketing efficiency perspectives

Lu, Wen-Min / Wang, Wei-Kang / Hung, Shiu-Wan / Lu, En-Tzu

Highlights ► We apply the additive efficiency decomposition to evaluate the airlines’ efficiency. ► We investigate whether corporate governance affects airline performance. ► We address the managerial decision-making matrix to improve performance.

Abstract This study explores the relationship between operating performance and corporate governance in 30 airline companies operating in the US. First, this study applies a two-stage Data Envelopment Analysis (DEA) to evaluate the production efficiency and marketing efficiency of the airlines. Our findings indicate that, in general, there is not as much dispersion in the relative productive efficiencies of the airlines as there is in their marketing efficiencies. The low-cost airlines, on average, are more efficient carriers than the full-service ones, but less efficient marketers. Secondly, truncated regression is used to explore whether the characteristics of corporate governance affect airline performance. The results demonstrate that corporate governance influences firm performance significantly. Finally, we address the managerial decision-making matrix and make suggestions to help airline managers improve performance.