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Board Reforms and Firm Value: Worldwide Evidence

Author

Listed:
  • Xi Li

    () (Department of Accounting, Hong Kong University of Science and Technology
    Institute for Emerging Market Studies, Hong Kong University of Science and Technology)

  • Mingyi Hung

    () (Department of Accounting, Hong Kong University of Science and Technology
    Institute for Emerging Market Studies, Hong Kong University of Science and Technology)

  • Larry Fauver

    (Department of Accounting, University of Tennessee)

  • Alvaro Taboada

    (Department of Accounting, University of Tennessee)

Abstract

We examine the impact of corporate board reforms on firm value in 41 countries. Using a difference-in-differences design, we find that firm value increases after enactment of the reforms. The valuation increase is associated with both the intensity and major components of the reform, including board independence, audit committee, and the separation of the roles of chief executive officer and chairman. We also find that the effect of these reforms primarily exists in countries with weak legal institutions. In addition, the effect of reforms is concentrated among comply-or-explain reforms, and the role of country-level institutions is less important for these reforms than for regulation reforms. Taken together, our findings suggest exogenously introduced governance changes benefit shareholders, mainly in countries with weak institutional quality and for reforms with a comply-or-explain approach.

Suggested Citation

  • Xi Li & Mingyi Hung & Larry Fauver & Alvaro Taboada, 2015. "Board Reforms and Firm Value: Worldwide Evidence," HKUST IEMS Working Paper Series 2015-20, HKUST Institute for Emerging Market Studies, revised Mar 2015.
  • Handle: RePEc:hku:wpaper:201520
    as

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    File URL: http://iems.ust.hk/assets/publications/working-papers-2015/iemswp2015-20.pdf
    File Function: First version, 2015
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    cross-country study; firm value; governance reforms;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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