How Corporate Governance Affects Firm Value: Evidence on Channels from Korea +
BERNARD S. BLACK *, WOOCHAN KIM **, HASUNG JANG *** & KYUNG SUH PARK ****
Abstract: If sloshed take aim corporate governance affects dissolute market determine (the charge of minority sh ars) or overall solid value, what are the transmit through which it does so? Prior work in appear markets provides establish of an association between corporate governance and firm market value, much limited evidence of a causal relationship, but very little evidence on the take through which governance may affect value, and whether the effect is notwithstanding on share price, or on overall firm value. We first confirm the association between governance and value using panel data on Korean humankind companies over 1998-2004. Firms with higher scores on an overall Korean corporate governance index (KCGI) have higher Tobins q; this impart is driven by the room construction component of KCGI and, little strongly, by ownership parity and disclosure components. Shareholder rights and board procedure subindices are not significant. We then provide evidence on several possible channels.
For firms with higher KCGI scores: (i) colligate party transactions are less adverse to firm value; (ii) firm profitability is more sensitive to shocks to patience profitability; (iii) capital expenditures are visit, but investment is more sensitive to profitability and growth opportunities; (iv) sales growth is lower; (v) profitability is more sensitive to growth opportunities; (vi) lagged board structure is associated with higher firm profitability; and (vii) dividends are higher, controlling for profits, and are more sensitive to profits. Board structure is associated with the first half a dozen channels; parity with the third, fourth, and sixth, and disclosure with the fifth. A 2SLS analysis (using 1999 levelheaded rules which apply to large firms to instrument for board structure) offers evidence that the marry between board structure and firm value, and between...If you want to tug a full essay, order it on our website: Orderessay
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