Corporate Governance and Firm Value During a Financial Crisis

Posted: 8 Jun 2009

See all articles by Sidney Leung

Sidney Leung

City University of Hong Kong (CityUHK) - Department of Accountancy

Bertrand Horwitz

SUNY at Binghamton - School of Management

Date Written: 2009

Abstract

We evaluate the effects of management ownership and other corporate governance variables on Hong Kong firms’ stock performance following the onset of the Asian Financial Crisis (1997-98), a period during which corporate governance structures to protect the interests of outside shareholders are most desired and needed. Hong Kong is selected because its securities laws and regulations closely resemble those of developed countries, thus providing insights into the expected effects of corporate governance structure on firm performance during a deep recession in the U.S. and Europe. Our investigation shows that Hong Kong firms with a more concentrated management (executive board) ownership displayed better capital market performance during the 13-month period of the Crisis. We also find that firms with more equity ownership by non-executive directors and in which the positions of CEO and board chairperson were occupied by the same individual experienced a smaller stock price decline. There was no evidence that a greater proportion of non-executive directors is associated with better performance. Our findings are consistent with the notion that there is a greater alignment of insiders with outside owners, rather than the expropriation by insiders who have the opportunity to divert value, for firms with higher levels of management ownership during an unexpected capital market crisis.

Keywords: Financial crisis, corporate governance, firm performance, management ownership

JEL Classification: G34, G10, G32, G38

Suggested Citation

Leung, Sidney and Horwitz, Bertrand, Corporate Governance and Firm Value During a Financial Crisis (2009). Review of Quantitative Finance and Accounting, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1415944

Sidney Leung (Contact Author)

City University of Hong Kong (CityUHK) - Department of Accountancy ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
China
+852 2788-7924 (Phone)
+852 2788-7944 (Fax)

Bertrand Horwitz

SUNY at Binghamton - School of Management ( email )

P.O. Box 6015
Binghamton, NY 13902-6015
United States

Register to save articles to
your library

Register

Paper statistics

Abstract Views
1,159
PlumX Metrics