Board Reforms and Firm Value: Worldwide Evidence

58 Pages Posted: 19 May 2015 Last revised: 15 Jul 2016

See all articles by Larry Fauver

Larry Fauver

University of Tennessee, Knoxville - Department of Finance; University of Tennessee

Mingyi Hung

Hong Kong University of Science & Technology (HKUST)

Xi Li

University of Arkansas - Department of Finance

Alvaro G. Taboada

Mississippi State University

Date Written: July 1, 2016

Abstract

We examine the impact of corporate board reforms on firm value in 41 countries. Using a difference-in-differences design, we find that board reforms increase firm value. Reforms involving board and audit committee independence, but not reforms involving separation of chairman and CEO positions, drive the valuation increases. In addition, while comply-or-explain reforms result in a greater increase in firm value than rule-based reforms, the effects of reforms are similar across Civil-law and Common-law countries. Further investigation suggests that the subsequent change in board independence plays an important role in explaining the effectiveness of the reforms.

Keywords: cross-country study, firm value, board reforms

JEL Classification: G15, G34, K22

Suggested Citation

Fauver, Larry and Hung, Mingyi and Li, Xi and Taboada, Alvaro G., Board Reforms and Firm Value: Worldwide Evidence (July 1, 2016). Journal of Financial Economics (JFE), Forthcoming; HKUST IEMS Working Paper No. 2015-20. Available at SSRN: https://ssrn.com/abstract=2607785 or http://dx.doi.org/10.2139/ssrn.2607785

Larry Fauver

University of Tennessee, Knoxville - Department of Finance ( email )

424 Stokely Management Center
Knoxville, TN 37996
United States

University of Tennessee ( email )

424 Stokely Management Center
Department of Finance
Knoxville, TN 37996-0540
United States
865-974-1722 (Phone)
865-974-1716 (Fax)

Mingyi Hung

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

Xi Li (Contact Author)

University of Arkansas - Department of Finance ( email )

Fayetteville, AR 72701
United States

Alvaro G. Taboada

Mississippi State University ( email )

Mississippi State, MS 39762
United States
662-325-6716 (Phone)
662-325-1977 (Fax)

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