Corporate governance and firm value: International evidence

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 firm value. Our findings are robust to alternative calculation procedures for the corporate governance indices and to alternative estimation techniques.

Investor Protection, Investment Efficiency and Value: The Case of Cross‐Listed Firms

“…The analyses also reveal no significant difference in the levels of excess cash among countries with different anti‐director rights indexes, legal origin, or economic development. These results are consistent with a recent finding in Ammann et al () that country‐level corporate governance has only a limited effect on the level of cash holdings. The M&A sample reveals similar patterns.…”

“…Using US data, Harford et al () report that strong country‐level investor protection neutralizes firm‐level barriers to shareholder rights. However, Ammann, Oesch, and Schmid () find the effect of country‐level corporate governance to be limited and dominated by that of firm‐level governance.…”

European Banks' Reputation for Corporate Social Responsibility

“…Sustainable and Responsible Investments (SRI) are managed by considering extra-financial criteria, restricting their investment universe to companies actively involved in managing ESG criteria, i.e., firms engaged in CSR practices. In the particular case of market interest in SRI, several studies (i.e., Ammann et al, 2011;Edmans, 2011;Galema et al, 2011;Jiraporn & Gleason, 2007;Klein & Zur, 2009) suggest evidence of a positive relationship between ESG factors and funds' performance. Improved CSR efforts increase the potential to maximize a firm's market value because the demand for socially responsible investment is on the rise (Mackey et al, 2007).…”

Corporate social responsibility reporting and corporate governance mechanisms: An international outlook from emerging countries

“…There is an important stream of research focused on exploring corporate governance and CSR disclosure; however, we find scant empirical evidence with regard to the association between CSR reporting and corporate governance mechanisms such as boards and, specifically, their composition (e.g., Chan, Watson, & Woodliff, ; Jain & Jamali, ). The evidence for this effect is even scarcer in the research analysing the effect of corporate governance mechanisms on CSR disclosure in firms belonging to emerging market economies (Claessens & Yurtoglu, ), although this is not the case in certain other lines of research, such as those relating to corporate governance and firm value internationally (Ammann, Oesch, & Schmid, ), which have focused specifically on emerging market economies such as India or Turkey (e.g., Balasubramanian, Black, & Khanna, ).…”