An Integrated Framework of Corporate Governance and Firm Valuation

44 Pages Posted: 1 Aug 2005

See all articles by Stefan Beiner

Stefan Beiner

University of Basel; University of Oxford - Said Business School

Markus Schmid

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

Wolfgang Drobetz

Hamburg University

Heinz Zimmermann

University of Basel - Center for Economic Science (WWZ) - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: July 2005

Abstract

Recent empirical research shows evidence of a positive relationship between the quality of firm-specific corporate governance and firm valuation. Instead of looking at one single corporate governance mechanism in isolation, we construct a broad corporate governance index and apply five additional variables related to ownership structure, board characteristics, and leverage to provide a comprehensive description of firm-level corporate governance for a representative sample of Swiss firms. To control for potential endogeneity of these six governance mechanisms, we develop a system of simultaneous equations and apply three-stage least squares (3SLS). Our results support the widespread hypothesis of a positive relationship between corporate governance and firm valuation.

Keywords: Corporate governance, principal-agent problems, ownership structure, firm valuation, endogeneity

JEL Classification: G12, G32, G34, G38

Suggested Citation

Beiner, Stefan and Schmid, Markus and Drobetz, Wolfgang and Zimmermann, Heinz, An Integrated Framework of Corporate Governance and Firm Valuation (July 2005). Available at SSRN: https://ssrn.com/abstract=762864 or http://dx.doi.org/10.2139/ssrn.762864

Stefan Beiner

University of Basel ( email )

Holbeinstrasse 12
Basel, CH-4051
Switzerland

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Markus Schmid (Contact Author)

University of St. Gallen - Swiss Institute of Banking and Finance ( email )

Rosenbergstrasse 52
St. Gallen, 9000
Switzerland

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Wolfgang Drobetz

Hamburg University ( email )

Moorweidenstrasse 18
Hamburg, 20148
Germany

Heinz Zimmermann

University of Basel - Center for Economic Science (WWZ) - Department of Finance ( email )

Peter Merian Weg 6
Basel, 4002
Switzerland
+41 61 267 33 16 (Phone)
+41 61 267 08 98 (Fax)

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