Outside directors and audit committees are widely considered to be central elements of good corporate governance. We use a 1999 Korean law as an exogenous shock to assess how board structure affects firm market value. The law mandates 50% outside directors and an audit committee for large public firms, but not smaller firms.
We study how this shock affects firm market value, using event study, difference-in-differences, and instrumental variable methods, within a regression discontinuity approach. The legal shock produces large share price increases for large firms, relative to mid-sized firms; share prices jump in 1999 when the reforms are announced.
This study examines the effect of outside director tenure length on firms’ market valuation and the voting behavior of outside directors. We make use...
What makes independent directors perform their monitoring duty? One possible reason is that they are concerned about being sanctioned by regulators if...