Munich Personal RePEc Archive

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

Black, Bernard and Kim, Woochan (2011): The effect of board structure on firm value: a multiple identification strategies approach using Korean data. Published in: Journal of Financial Economics , Vol. 104, (April 2012): pp. 203-226.

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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 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 how this shock affects firm market value, using event study, difference-in-differences, and instrumental variable methods, within a regression discontinuity approach. The legal shock produces large share price increases for large firms, relative to mid-sized firms; share prices jump in 1999 when the reforms are announced.

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