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The effect of board structure on firm value: A multiple identification strategies approach using Korean data

  • Black, Bernard
  • Kim, Woochan

Outside directors and audit committees are widely considered to be central elements of good corporate governance. We use a 1999 Korean law as an exogenous shock to assess whether and how board structure affects firm market value. The law mandates 50% outside directors and an audit committee for large public firms, but not smaller firms. We study this shock using event study, difference-in-differences, and instrumental variable methods, within an overall regression discontinuity approach. The legal shock produces economically large share price increases for large firms, relative to mid-sized firms; their share prices jump in 1999 when the reforms are announced.

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Article provided by Elsevier in its journal Journal of Financial Economics.

Volume (Year): 104 (2012)
Issue (Month): 1 ()
Pages: 203-226

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Handle: RePEc:eee:jfinec:v:104:y:2012:i:1:p:203-226
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505576

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