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Equity market liberalization and corporate governance

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Author Info

  • Bae, Kee-Hong
  • Goyal, Vidhan K.

Abstract

Equity market liberalizations open up domestic stock markets to foreign investors. A puzzle in the literature is why developing countries exhibit relatively small financial impacts associated with liberalizations. We use cross-firm variation in corporate governance at the time of the official liberalization of the equity market in Korea to test whether governance can explain the extent to which firms benefit when countries liberalize. The results show that better-governed firms experience significantly greater stock price increases upon equity market liberalization. Following the liberalization in Korea, foreign ownership in firms with strong corporate governance was significantly higher than that in firms with weak governance. Better-governed firms also exhibit higher rates of physical capital accumulation after liberalization.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Corporate Finance.

Volume (Year): 16 (2010)
Issue (Month): 5 (December)
Pages: 609-621

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Handle: RePEc:eee:corfin:v:16:y:2010:i:5:p:609-621

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Web page: http://www.elsevier.com/locate/jcorpfin

Related research

Keywords: Equity market liberalization Risk-sharing Cost of capital Corporate governance;

References

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Citations

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Cited by:
  1. Thomas O'Connor, 2012. "Legal bonding, investor recognition, and cross-listing premia in emerging markets," Economics, Finance and Accounting Department Working Paper Series n226-12.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  2. Thomas O'Connor, 2012. "Investability, Corporate Governance and Firm Value," Economics, Finance and Accounting Department Working Paper Series n223-12.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  3. Thomas O'Connor & Stephen Kinsella & Vincent O’Sullivan, 2012. "Legal protection of investors, corporate governance, and investable premia in emerging markets," Economics, Finance and Accounting Department Working Paper Series n229-12.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.

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