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Corporate governance and firm value: International evidence

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  • Ammann, Manuel
  • Oesch, David
  • Schmid, Markus M.

Abstract

In this paper, we investigate the relation between firm-level corporate governance and firm value based on a large and previously unused dataset from Governance Metrics International (GMI) comprising 6663 firm-year observations from 22 developed countries over the period from 2003 to 2007. Based on a set of 64 individual governance attributes we construct two alternative additive corporate governance indices with equal weights attributed to the governance attributes and one index derived from a principal component analysis. For all three indices we find a strong and positive relation between firm-level corporate governance and firm valuation. In addition, we investigate the value relevance of governance attributes that document the companies' social behavior. Regardless of whether these attributes are considered individually or aggregated into indices, and even when "standard" corporate governance attributes are controlled for, they exhibit a positive and significant effect on firm value. Our findings are robust to alternative calculation procedures for the corporate governance indices and to alternative estimation techniques.

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Bibliographic Info

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

Volume (Year): 18 (2011)
Issue (Month): 1 (January)
Pages: 36-55

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Handle: RePEc:eee:empfin:v:18:y:2011:i:1:p:36-55

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

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Keywords: Corporate governance Firm valuation Minimum standards Principal component analysis Corporate social responsibility;

References

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Citations

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Cited by:
  1. Al-Malkawi, Husam-Aldin N. & Pillai, Rekha & Bhatti, M.I., 2014. "Corporate governance practices in emerging markets: The case of GCC countries," Economic Modelling, Elsevier, vol. 38(C), pages 133-141.
  2. Alves, Paulo & Couto, Eduardo & Francisco, Paulo, 2014. "Executive Pay And Performance In Portuguese Listed Companies," MPRA Paper 55189, University Library of Munich, Germany.
  3. Lee, Hyunchul & Kim, Dukyong & Seo, Minkyo, 2013. "Market valuation of marketing alliances in East Asia: Korean evidence," Journal of Business Research, Elsevier, vol. 66(12), pages 2492-2499.
  4. Emilia Peni & Sami Vähämaa, 2012. "Did Good Corporate Governance Improve Bank Performance during the Financial Crisis?," Journal of Financial Services Research, Springer, vol. 41(1), pages 19-35, April.
  5. Monika Kubik-Kwiatkowska, 2012. "Value relevance of financial reporting on the Warsaw Stock Exchange," Working Papers 60, Department of Applied Econometrics, Warsaw School of Economics.
  6. Claudiu BRANDAS, 2011. "Study on the Support Systems for Corporate Governance," Informatica Economica, Academy of Economic Studies - Bucharest, Romania, vol. 15(4), pages 55-63.
  7. Daniel Ferreira Caixe & Elizabeth Krauter, 2014. "The Relation between corporate governance and market value:mitigating endogeneityProblems," Brazilian Business Review, Fucape Business School, vol. 11(1), pages 90-110, January.
  8. Hashem Valipour & Javad Moradi & Ladan Zare, 2012. "Examining the Effects of Non-Bound Board members and Ownership Structure as Corporate governance Mechanisms on Firm Value," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 2(2), pages 55-68, April.
  9. Li, Wei-Xuan & Chen, Clara Chia-Sheng & French, Joseph J., 2012. "The relationship between liquidity, corporate governance, and firm valuation: Evidence from Russia," Emerging Markets Review, Elsevier, vol. 13(4), pages 465-477.

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