Does External Monitoring Substitute for or Complement Internal Monitoring by Corporate Board?–Evidence From Korean State-owned Enterprises

Jongseok Lee and Seungwon Yu

Emerging Markets Finance and Trade, 2020, vol. 56, issue 15, 3646-3661

Abstract: Numerous studies have investigated whether regulation substitutes for or complements internal governance. The results have been inconclusive due to their over reliance on agency theory and extensive use of demographic proxy variables to real board activities. We empirically investigate the relationship between government performance evaluation (GPEs) and internal monitoring by SOE boards in the context of Korean state-owned enterprises (SOEs), overcoming the limitations of existing empirical studies. This analysis is enabled by data collected from the 1,525 board minutes of 170 Korean SOEs. Our prior expectation is a substitutive relationship. First, the similarity of GPE and internal monitoring by the board makes the relative cost of internal monitoring more expensive. Second, GPEs only reward managers, leaving outside directors unpaid. The empirical results are consistent with our expectation, and indicate that even in heavily regulated SOEs, internal imperatives outweigh institutional pressure. Hence, policy makers should carefully design GPEs so as not to crowd-out the potential benefit of internal monitoring by SOE boards.

Date: 2020
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/1540496X.2019.1644162 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:56:y:2020:i:15:p:3646-3661

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MREE20

DOI: 10.1080/1540496X.2019.1644162

Access Statistics for this article

More articles in Emerging Markets Finance and Trade from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().