Corporate Governance Practices and Firm Value
BERTHELOT S., FRANCOEUR, C. and R. LABELLE, 2011. Corporate Governance Practice and Firm value. Forthcoming in International Journal of Managerial Finance.
Abstract
This study investigates the relationship between corporate governance practices or mechanisms and firm value, as measured by accounting and market data. Partial least square analyses was performed on a sample of 355 sets of observations from 199 Canadian listed companies. The Canadian principles-based institutional setting allows tests on corporate governance practices that show greater variability than what is seen in rules-based countries such as in the USA SOX environment. Results suggest that some governance practices, namely the percentage of independent directors on the board, the use of stock options and the frequency of board meetings are significantly and negatively related to the firm’s net book value or income. However, most individual governance practices appear to have no significant impact on the firms’ market value. This study does not support the current emphasis by regulators on governance practices which mainly concern the monitoring function of the board as opposed to its strategic one.
