Corporate Governance, Family Ownership and Firm Value: The Canadian Evidence

16 Pages Posted: 17 Dec 2005

See all articles by Peter Klein

Peter Klein

Simon Fraser University (SFU) - Finance Area

Daniel M. Shapiro

Simon Fraser University (SFU) - Policy Analysis Area

Jeffrey Young

affiliation not provided to SSRN

Abstract

We analyse the relationship between firm value, as measured by Tobin's q, and newly released indices of effective corporate governance for a sample of 263 Canadian firms. The results indicate that corporate governance does matter in Canada. However, not all elements of measured governance are important, and the effects of governance do differ by ownership category. For the entire sample of firms we find no evidence that a total governance index affects firm performance. This is mainly because we find no evidence that board independence, the most heavily-weighted sub-index, has any positive effect on firm performance. Indeed, for family-owned firms we find that the effect is negative. In general, sub-indices measuring effective compensation, disclosure and shareholder rights practices enhance performance and this is true for most ownership types. We also find no evidence that governance practices are endogenous.

Keywords: corporate governance, governance rankings, board of directors, family firms, firm

Suggested Citation

Klein, Peter Charles and Shapiro, Daniel and Young, Jeffrey, Corporate Governance, Family Ownership and Firm Value: The Canadian Evidence. Corporate Governance: An International Review, Vol. 13, No. 6, pp. 769-784, November 2005. Available at SSRN: https://ssrn.com/abstract=856652 or http://dx.doi.org/10.1111/j.1467-8683.2005.00469.x

Peter Charles Klein

Simon Fraser University (SFU) - Finance Area ( email )

Burnaby, British Columbia V5A 1S6
Canada
604-291-5605 (Phone)

Daniel Shapiro (Contact Author)

Simon Fraser University (SFU) - Policy Analysis Area ( email )

Room 2400 - 515 West Hastings St.
Burnaby, British Columbia V5A 1S6
Canada
604-291-5155 (Phone)
604-291-5122 (Fax)

Jeffrey Young

affiliation not provided to SSRN

No Address Available

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