Corporate governance and firm value: evidence from the Korean financial crisis

During the 1997 Korean financial crisis, firms with higher ownership concentration by unaffiliated foreign investors experienced a smaller reduction in their share value. Firms that had higher disclosure quality and alternative sources of external financing also suffered less. In contrast, chaebol f...

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Bibliographic Details
Published in:Journal of financial economics 2004-02, Vol.71 (2), p.265-313
Main Authors: Baek, Jae-Seung, Kang, Jun-Koo, Suh Park, Kyung
Format: Article
Language:English
Subjects:
Chaebol
Comparative analysis
Controlling shareholder
Corporate governance
Economic crisis
Economics
Enterprises
Finance
Financial crisis
Financial economics
Financial management
Financial performance
Firm value
Hypotheses
Korea
Main bank
Ownership
Securities markets
Shareholder voting
Statistical analysis
Stock prices
Stockholders
Valuation
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Summary:During the 1997 Korean financial crisis, firms with higher ownership concentration by unaffiliated foreign investors experienced a smaller reduction in their share value. Firms that had higher disclosure quality and alternative sources of external financing also suffered less. In contrast, chaebol firms with concentrated ownership by controlling family shareholders experienced a larger drop in the value of their equity. Firms in which the controlling shareholders’ voting rights exceeded cash flow rights and those who borrowed more from the main banks also had lower returns. Our results suggest that change in firm value during a crisis is a function of firm-level differences in corporate governance measures.
ISSN:0304-405X
1879-2774
DOI:10.1016/S0304-405X(03)00167-3