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

Bernard Black*, Woochan Kim

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

143 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)203-226
Number of pages24
JournalJournal of Financial Economics
Volume104
Issue number1
DOIs
StatePublished - Apr 1 2012

Keywords

  • Audit committee
  • Board of directors
  • Corporate governance
  • Korea
  • Outside directors

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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