Owner risk and firm valuation: evidence from Korean business group

Haksoon Kim

Afro-Asian Journal of Finance and Accounting, 2022, vol. 12, issue 3, 366-377

Abstract: Since Berle and Means (1932) and Jensen and Meckling (1976), numerous empirical studies have been done on corporate governance regarding ownership structure, board characteristics, and monitoring mechanisms. However, there is little empirical evidence of the relationship between owner risk and firm valuation. We investigate the relationship using the unique owner risk index score data of Korean business groups. A high score means low owner risk. We find that there is a positive relationship between owner risk index score and firm valuation for Korean business groups. Specifically, the positive relationship is statistically significant in the professionalism and quality or ethical management without group dummy. The positive relationship is statistically significant in the transparency and accountability or ethical management with group dummy. The results suggest that owner risk is an important governance factor in affecting firm valuation.

Keywords: owner risk; firm valuation; corporate governance; business group. (search for similar items in EconPapers)
Date: 2022
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