An Empirical Study on Corporate Governance and Market Valuation in China

An Empirical Study on Corporate Governance and Market Valuation in China This paper empirically studies the relationship between the governance mechanisms and the market valuation of publicly listed firms in China. The authors construct measures for corporate governance mechanisms and measures of market valuation for all publicly listed firms on the two stock markets in China by using data from the firm’s annual reports. They then investigate how the market-valuation variables are affected by the corporate governance variables while controlling for a number of factors commonly considered in market valuation analysis. A corporate governance index is also constructed to summarize the information contained in the corporate governance variables. The index is found to have statistically and economically significant effects on market valuation. The analysis indicates that investors pay a significant premium for well-governed firms in China, benefiting firms that improve their governance mechanisms. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Frontiers of Economics in China Brill

An Empirical Study on Corporate Governance and Market Valuation in China

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Publisher
Brill
Copyright
Copyright 2006 by Koninklijke Brill NV, Leiden, The Netherlands
ISSN
1673-3444
eISSN
1673-3568
DOI
10.1007/s11459-005-0011-0
Publisher site
See Article on Publisher Site

Abstract

This paper empirically studies the relationship between the governance mechanisms and the market valuation of publicly listed firms in China. The authors construct measures for corporate governance mechanisms and measures of market valuation for all publicly listed firms on the two stock markets in China by using data from the firm’s annual reports. They then investigate how the market-valuation variables are affected by the corporate governance variables while controlling for a number of factors commonly considered in market valuation analysis. A corporate governance index is also constructed to summarize the information contained in the corporate governance variables. The index is found to have statistically and economically significant effects on market valuation. The analysis indicates that investors pay a significant premium for well-governed firms in China, benefiting firms that improve their governance mechanisms.

Journal

Frontiers of Economics in ChinaBrill

Published: Jan 1, 2006

Keywords: corporate governance mechanisms; market valuation; corporate governance index; corporate governance premium

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