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Corporate governance and firm value: International evidence


Oesch, David; Ammann, Manuel; Schmid, Markus M (2011). Corporate governance and firm value: International evidence. Journal of Empirical Finance, 18(1):36-55.

Abstract

In this paper, we investigate the relation between firm-level corporate governance and firm value based on a large and previously unused dataset from Governance Metrics International(GMI) comprising 6663 firm-year observations from 22 developed countries over the period from 2003 to 2007. Based on a set of 64 individual governance attributes we construct two alternative additive corporate governance indices with equal weights attributed to the governance attributes and one index derived from a principal component analysis. For all three indices we find a strong and positive relation between firm-level corporate governance and firm valuation. In addition, we investigate the value relevance of governance attributes that document the companies' social behavior. Regardless of whether these attributes are considered individually or aggregated into indices, and even when “standard” corporate
governance attributes are controlled for, they exhibit a positive and significant effect on firmvalue. Our findings are robust to alternative calculation procedures for the corporate governance indices and to alternative estimation techniques.

Abstract

In this paper, we investigate the relation between firm-level corporate governance and firm value based on a large and previously unused dataset from Governance Metrics International(GMI) comprising 6663 firm-year observations from 22 developed countries over the period from 2003 to 2007. Based on a set of 64 individual governance attributes we construct two alternative additive corporate governance indices with equal weights attributed to the governance attributes and one index derived from a principal component analysis. For all three indices we find a strong and positive relation between firm-level corporate governance and firm valuation. In addition, we investigate the value relevance of governance attributes that document the companies' social behavior. Regardless of whether these attributes are considered individually or aggregated into indices, and even when “standard” corporate
governance attributes are controlled for, they exhibit a positive and significant effect on firmvalue. Our findings are robust to alternative calculation procedures for the corporate governance indices and to alternative estimation techniques.

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42 citations in Web of Science®
53 citations in Scopus®
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Business Administration
Dewey Decimal Classification:330 Economics
Language:English
Date:2011
Deposited On:30 Sep 2014 13:26
Last Modified:05 Apr 2016 18:23
Publisher:Elsevier
ISSN:0927-5398
Publisher DOI:https://doi.org/10.1016/j.jempfin.2010.10.003
Other Identification Number:merlin-id:10116

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