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Corporate Governance, Family Ownership and Firm Value: the Canadian evidence

Corporate Governance, Family Ownership and Firm Value: the Canadian evidence We analyse the relationship between firm value, as measured by Tobin's q, and newly released indices of effective corporate governance for a sample of 263 Canadian firms. The results indicate that corporate governance does matter in Canada. However, not all elements of measured governance are important, and the effects of governance do differ by ownership category. For the entire sample of firms we find no evidence that a total governance index affects firm performance. This is mainly because we find no evidence that board independence, the most heavily‐weighted sub‐index, has any positive effect on firm performance. Indeed, for family‐owned firms we find that the effect is negative. In general, sub‐indices measuring effective compensation, disclosure and shareholder rights practices enhance performance and this is true for most ownership types. We also find no evidence that governance practices are endogenous. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Corporate Governance Wiley

Corporate Governance, Family Ownership and Firm Value: the Canadian evidence

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References (52)

Publisher
Wiley
Copyright
Copyright © 2005 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0964-8410
eISSN
1467-8683
DOI
10.1111/j.1467-8683.2005.00469.x
Publisher site
See Article on Publisher Site

Abstract

We analyse the relationship between firm value, as measured by Tobin's q, and newly released indices of effective corporate governance for a sample of 263 Canadian firms. The results indicate that corporate governance does matter in Canada. However, not all elements of measured governance are important, and the effects of governance do differ by ownership category. For the entire sample of firms we find no evidence that a total governance index affects firm performance. This is mainly because we find no evidence that board independence, the most heavily‐weighted sub‐index, has any positive effect on firm performance. Indeed, for family‐owned firms we find that the effect is negative. In general, sub‐indices measuring effective compensation, disclosure and shareholder rights practices enhance performance and this is true for most ownership types. We also find no evidence that governance practices are endogenous.

Journal

Corporate GovernanceWiley

Published: Nov 1, 2005

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