TY - JOUR
T1 - Predicting firms' corporate governance choices
T2 - Evidence from Korea
AU - Black, Bernard S.
AU - Jang, Hasung
AU - Kim, Woochan
N1 - Funding Information:
Earlier versions of this paper were presented at the Korea Development Institute Conference on Corporate Governance and the Capital Market in Korea, Korean Finance Association, McCombs School of Business at University of Texas, National Bureau of Economic Research Conference on Corporate Governance, and BSI Gamma Conference on Corporate Governance. We thank BSI Gamma Foundation, KDI School of Public Policy and Management, and Korea University for financial support, Korea Corporate Governance Service for access to corporate governance survey results, Seo Yeon Hong and Wenton Zheng for research assistance, and Franklin Allen, Kee Hong Bae, Yong-Seok Choi, Alexander Dyck, Chang-Kyun Park, René Stulz, and an anonymous referee for comments on earlier drafts.
Copyright:
Copyright 2006 Elsevier B.V., All rights reserved.
PY - 2006/6
Y1 - 2006/6
N2 - This paper contributes to a new literature on the factors that affect firms' corporate governance practices. We find that regulatory factors are highly important, largely because Korean rules impose special governance requirements on large firms (assets > 2 trillion won). Industry factors, firm size, and firm risk are also important. Other firm-specific factors only modestly affect governance even when they are statistically significant. This suggests that many Korean firms do not choose their governance to maximize share price. Among firm-specific factors, the most significant are size (larger firms are better governed) and firm risk (riskier firms are better governed). Long-term averages of profitability and equity finance need are significant, where short-term averages are not. This is consistent with "sticky governance", in which firms alter their governance slowly in response to economic factors.
AB - This paper contributes to a new literature on the factors that affect firms' corporate governance practices. We find that regulatory factors are highly important, largely because Korean rules impose special governance requirements on large firms (assets > 2 trillion won). Industry factors, firm size, and firm risk are also important. Other firm-specific factors only modestly affect governance even when they are statistically significant. This suggests that many Korean firms do not choose their governance to maximize share price. Among firm-specific factors, the most significant are size (larger firms are better governed) and firm risk (riskier firms are better governed). Long-term averages of profitability and equity finance need are significant, where short-term averages are not. This is consistent with "sticky governance", in which firms alter their governance slowly in response to economic factors.
KW - Corporate governance
KW - Corporate governance index
KW - Korea
KW - Law and finance
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U2 - 10.1016/j.jcorpfin.2005.08.001
DO - 10.1016/j.jcorpfin.2005.08.001
M3 - Article
AN - SCOPUS:33645852244
VL - 12
SP - 660
EP - 691
JO - Journal of Corporate Finance
JF - Journal of Corporate Finance
SN - 0929-1199
IS - 3
ER -