Title: The relationship between corporate governance, foreign investors' shareholdings, and corporate performance: the case of South Korea

Authors: Sun-Wung Hwang; Yu Rim Jung

Addresses: College of Business and Economics, School of Business, Chung-Ang University, 84 Heukseok-ro, Dongjak-gu, Seoul, 156-756, South Korea ' Department of Business Administration, Graduate School, Chung-Ang University, Seoul, South Korea

Abstract: This study investigates the effects of improved corporate governance on firm value as well as firm performance. By utilising corporate governance index data for the period of 2006 through 2010 published by the Korea Corporate Governance Service, we got the following results. First, firms with relatively good corporate governance yield better firm performance, which in turn results in greater firm values. Specifically, we found through regression analyses that the corporate governance index has a significant positive relation with EBIT/SALES, Tobin's Q, and the market-to-book value ratio (MB). Second, the corporate governance index has a significantly positive impact on the ownership of foreign investors. Third, foreign investor share holdings positively affect the firm performance measured by MB, Tobin's Q, and abnormal returns.

Keywords: corporate governance structure; firm performance; firm value; foreign investors; share holdings; South Korea.

DOI: 10.1504/AAJFA.2016.080521

Afro-Asian Journal of Finance and Accounting, 2016 Vol.6 No.4, pp.318 - 338

Available online: 23 Nov 2016 *

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