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; Swiss Finance Institute

Wolfgang Drobetz

University of Hamburg

Heinz Zimmermann

University of Basel - Faculty of Business and Economics

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 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 )

Unterer Graben 21
St. Gallen, 9000
Switzerland

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

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Swiss Finance Institute

c/o University of St. Gallen
Dufourstrassse 50
St. Gallen, SG 9000
Switzerland

Wolfgang Drobetz

University of Hamburg ( email )

Moorweidenstrasse 18
Hamburg, 20148
Germany

Heinz Zimmermann

University of Basel - Faculty of Business and Economics ( email )

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

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