Outsider board activity, ownership structure and firm value : evidence from Korea

Min, Byung-Seong & Verhoeven, Peter (2013) Outsider board activity, ownership structure and firm value : evidence from Korea. International Review of Finance, 13(2), pp. 187-214.

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Abstract

Using a sample of publicly listed firm in Korea from 2002 to 2006, this article examines the impact of board monitoring on firm value and productivity. We use outsider's attendance of board meetings as a proxy for board monitoring. Consistent with the commitment hypothesis, we find that outsider's attendance rate increases firm value, suggesting that attending board meeting itself is a strong signal that reflects outsider's intention to monitor insiders. While ownership of controlling shareholders negatively affects firm value, this relationship is not moderated by increased monitoring by outsiders. Our findings provide further evidence that the outside director system is less effective in chaebol-affiliated firms. Results also indicate that the effect of outsider's board monitoring activity on investor's valuation of the firm is greater than on productivity improvement of the firm. Our conclusions are robust for possible endogeneity in the relationship between firm value and board attendance by outside directors.

Impact and interest:

7 citations in Scopus
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5 citations in Web of Science®

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ID Code: 65310
Item Type: Journal Article
Refereed: Yes
DOI: 10.1111/irfi.12004
ISSN: 1369-412X
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Economics & Finance
Deposited On: 18 Dec 2013 01:57
Last Modified: 18 Dec 2013 21:06

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