How does corporate governace pay off? Evidence from Korean stock listings

Corporate governance is an envelope for the mechanisms, processes and relations through which corporations are controlled and guided. Consequently, corporate governance affects operational performance and, in turn, stock returns, as Gompers et al. (2003) find. In this research, we use the Korea Corp...

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Bibliographic Details
Published in:Investment management & financial innovations 2016, Vol.13 (4), p.225-230
Main Authors: Moon Sub Choi, Paul, Hwa Choi, Joung, Son, Mookyong
Format: Article
Language:English
Subjects:
Corporate governance
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Summary:Corporate governance is an envelope for the mechanisms, processes and relations through which corporations are controlled and guided. Consequently, corporate governance affects operational performance and, in turn, stock returns, as Gompers et al. (2003) find. In this research, we use the Korea Corporate Governance Stock Price Index (KOGI) to test a possible linkage between corporate governance and shareholder wealth in Korea.Factor mimicking portfolios sorted per KOGI are constructed to estimate a corporate governance risk factor (“good minus bad”). By augmenting this new factor to the existing factor models (Fama and French, 1993; Carhart, 1997) to fit multiply imputed data, we find evidence that corporate governanceinfluences stock pricing in Korea. Keywords: CG; Risk factor; Factor-mimicking portfolio; Long-short portfolio; Multiple imputation. JEL Classification: G11, G12, G34, C11
ISSN:1810-4967
1812-9358
DOI:10.21511/imfi.13(4-1).2016.08