Title: Owner risk and firm valuation: evidence from Korean business group

Authors: Haksoon Kim

Addresses: Department of Economics and Finance, Troy University, Montgomery, Alabama, 36104, USA

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.

DOI: 10.1504/AAJFA.2022.124250

Afro-Asian Journal of Finance and Accounting, 2022 Vol.12 No.3, pp.366 - 377

Received: 27 Mar 2018
Accepted: 28 Feb 2019
Published online: 20 Jul 2022 *

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