Does Corporate Governance Matter? (Evidence from the Korean Market)

Title
Does Corporate Governance Matter? (Evidence from the Korean Market)
Authors
BLACK, BERNARD S.Jang, Hasung
Keywords
corporate governance; firm valuation; stock return
Issue Date
2002-05-08
Series/Report no.
KDI Working Paper Series;02-04
Abstract
In this paper, we show that corporate governance is an important factor explaining firm value and firm return in the Korean market. Such analysis is made possible by making use of an extensive survey data compiled by the Korea Stock Exchange in the first half of 2001, from which we construct a corporate governance index (0~100) for a cross-section of 540 companies. Evidence shows that a moderate improvement in corporate governance, say an increase of index by 10 units, on average, results in an increase of market capitalization by 3 percent of the company’s book asset value or 7 percent of the company’s book value of common equity. Also, evidence shows that an increase in corporate governance index by 10 units, on average, increases the level of buy-and-hold return by 4~6 percent over a year period.
URI
http://archives.kdischool.ac.kr/handle/11125/16922
Files in This Item:
Appears in Collections:
KDI School Working Paper Series


Items in DSpace are protected by copyright, with all rights reserved, unless otherwise indicated.