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http://ssrn.com/abstract=1692222
 
 

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Corporate Governance and Firm Value: International Evidence


Manuel Ammann


University of St. Gallen - Swiss Institute of Banking and Finance

David Oesch


University of Zurich

Markus M. Schmid


University of St. Gallen - Swiss Institute of Banking and Finance; University of St. Gallen - SoF: School of Finance

November 3, 2010


Abstract:     
In this paper, we investigate the relation between firm-level corporate governance and firm value based on a large and previously unused dataset from Governance Metrics International (GMI) comprising 6,663 firm-year observations from 22 developed countries over the period from 2003 to 2007. Based on a set of 64 individual governance attributes we construct two alternative additive corporate governance indices with equal weights attributed to the governance attributes and one index derived from a principal component analysis. For all three indices we find a strong and positive relation between firm-level corporate governance and firm valuation. In addition, we investigate the value relevance of governance attributes that document the companies’ social behavior. Regardless of whether these attributes are considered individually or aggregated into indices, and even when “standard” corporate governance attributes are controlled for, they exhibit a positive and significant effect on firm value. Our findings are robust to alternative calculation procedures for the corporate governance indices and to alternative estimation techniques.

Number of Pages in PDF File: 51

Keywords: Corporate Governance, Firm Valuation, Minimum Standards, Principal Component Analysis, Corporate Social Responsibility

JEL Classification: G32, G34, G38

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Date posted: October 15, 2010 ; Last revised: May 29, 2013

Suggested Citation

Ammann, Manuel and Oesch, David and Schmid, Markus M., Corporate Governance and Firm Value: International Evidence (November 3, 2010). Available at SSRN: http://ssrn.com/abstract=1692222 or http://dx.doi.org/10.2139/ssrn.1692222

Contact Information

Manuel Ammann
University of St. Gallen - Swiss Institute of Banking and Finance ( email )
Rosenbergstrasse 52
St. Gallen, CH-9000
Switzerland
David Oesch
University of Zurich ( email )
Rämistrasse 71
Zürich, CH-8006
Switzerland
Markus M. Schmid (Contact Author)
University of Saint Gallen - Swiss Institute of Banking and Finance ( email )
Rosenbergstrasse 52
St. Gallen, 9000
Switzerland
University of Saint Gallen - SoF: School of Finance ( email )
Rosenbergstrasse 52
St.Gallen, CH-9000
Switzerland

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