Does the Quality of Corporate Governance Affect Firm Valuation and Risk? Evidence from a Corporate Governance Scorecard in Hong Kong

30 Pages Posted: 17 Nov 2010

See all articles by Yan-Leung Cheung

Yan-Leung Cheung

The Education University of Hong Kong

Aris Stouraitis

affiliation not provided to SSRN

Weiqiang Tan

affiliation not provided to SSRN

Abstract

Using Hong Kong firm data, we construct an index of corporate governance during 2002–2005, which scores the corporate governance practices of listed companies from the public shareholders' perspective based on the Organization for Economic Corporation and Development Principles of Corporate Governance. The findings show that family firms and firms with concentrated ownership structures are associated with bad corporate governance. The evidence also shows that these firms improve their corporate governance practices slower than their peers. Overall, the quality of corporate governance is very significant in explaining future company stock returns and risk. Good corporate governance is associated with both higher stock returns and with lower risk. Improvements in corporate governance are associated with significantly higher stock returns and lower company risk.

Suggested Citation

Cheung, Yan-Leung and Stouraitis, Aris and Tan, Weiqiang, Does the Quality of Corporate Governance Affect Firm Valuation and Risk? Evidence from a Corporate Governance Scorecard in Hong Kong. International Review of Finance, Vol. 10, Issue 4, pp. 403-432, December 2010, Available at SSRN: https://ssrn.com/abstract=1710338 or http://dx.doi.org/10.1111/j.1468-2443.2010.01106.x

Yan-Leung Cheung (Contact Author)

The Education University of Hong Kong ( email )

Department of Social Sciences
10 Lo Ping Road, Tai Po, New Territories
Hong Kong
Hong Kong

Aris Stouraitis

affiliation not provided to SSRN

No Address Available

Weiqiang Tan

affiliation not provided to SSRN ( email )

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