The Value of Outside Directors: Evidence from Corporate Governance Reform in Korea

This paper examines the valuation impacts of outside independent directors in Korea, where a regulation requiring outside directors was instituted after the Asian financial crisis. In contrast to studies of U.S. firms, the effects of independent directors on firm performance are strongly positive. F...

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Bibliographic Details
Published in:Journal of financial and quantitative analysis 2007-12, Vol.42 (4), p.941-962
Main Authors: Choi, Jongmoo Jay, Park, Sae Woon, Yoo, Sean Sehyun
Format: Article
Language:English
Subjects:
Bank assets
Banking regulation
Business management
Business networks
Business structures
Business studies
Chaebol
Corporate governance
Economic crises
Economic crisis
Expatriates
Financial economics
Investors
Noncitizens
Organizational performance
Outside directors
Quantitative analysis
Senior management
Shareholders
South Korea
Valuation
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Summary:This paper examines the valuation impacts of outside independent directors in Korea, where a regulation requiring outside directors was instituted after the Asian financial crisis. In contrast to studies of U.S. firms, the effects of independent directors on firm performance are strongly positive. Foreigners also have positive impacts. The effects of indigenous institutions such as chaebol or family control are insignificant or negative. This implies that the effect of outsiders depends on board composition as well as the nature of the market in which the firm operates.
ISSN:0022-1090
1756-6916
DOI:10.1017/S0022109000003458