Board Reforms and Firm Value: Worldwide Evidence

Xi Li (), Mingyi Hung (), Larry Fauver and Alvaro Taboada
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Xi Li: Department of Accounting, Hong Kong University of Science and Technology
Mingyi Hung: Department of Accounting, Hong Kong University of Science and Technology
Larry Fauver: Department of Accounting, University of Tennessee
Alvaro Taboada: Department of Accounting, University of Tennessee

No 2015-20, HKUST IEMS Working Paper Series from HKUST Institute for Emerging Market Studies

Abstract: We examine the impact of corporate board reforms on firm value in 41 countries. Using a difference-in-differences design, we find that firm value increases after enactment of the reforms. The valuation increase is associated with both the intensity and major components of the reform, including board independence, audit committee, and the separation of the roles of chief executive officer and chairman. We also find that the effect of these reforms primarily exists in countries with weak legal institutions. In addition, the effect of reforms is concentrated among comply-or-explain reforms, and the role of country-level institutions is less important for these reforms than for regulation reforms. Taken together, our findings suggest exogenously introduced governance changes benefit shareholders, mainly in countries with weak institutional quality and for reforms with a comply-or-explain approach.

Keywords: cross-country study; firm value; governance reforms (search for similar items in EconPapers)
JEL-codes: G15 G34 K22 (search for similar items in EconPapers)
Pages: 54 pages
Date: 2015-03, Revised 2015-03
New Economics Papers: this item is included in nep-bec, nep-cfn and nep-law
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