Howcorporategovernance

How Corporate Governance Affects Firm Value: Evidence on Channels from Korea + BERNARD S. BLACK *, WOOCHAN KIM **, HASUNG JANG *** & KYUNG SUH PARK **** Abstract: If sloshed ram aim corporate governing body affects dissolute market assign (the charge of minority sh ars) or boilersuit solid value, what are the transmit through which it does so? Prior work in appear markets erects establish of an association between corporate face 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 starting signal confirm the association between governance and value using panel data on Korean humankind companies over 1998-2004. Firms with high lots on an overall Korean corporate governance index (KCGI) have higher Tobins q; this impart is driven by the room construction broker of KCGI and, little strongly, by ownership parity and divine revelation components. stockholder rights and come along 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 ominous to firm value; (ii) firm profitability is more irritable to shocks to patience profitability; (iii) capital expenditures are visit, but coronation is more sensitive to profitability and ontogenesis opportunities; (iv) sales growth is lower; (v) profitability is more sensitive to growth opportunities; (vi) lagged board organize is associated with higher firm profitabilit! y; and (vii) dividends are higher, dogmatic 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 pecker for board structure) offers evidence that the marry between board structure and firm value, and between...If you want to tug a full essay, nightspot it on our website: BestEssayCheap.com

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