The Effect of Board Structure on Firm Value: A Multiple Identification Strategies Approach Using Korean Data

61 Pages Posted: 5 Mar 2007 Last revised: 22 Jan 2019

See all articles by Bernard S. Black

Bernard S. Black

Northwestern University - Pritzker School of Law; Northwestern University - Kellogg School of Management; European Corporate Governance Institute (ECGI)

Woochan Kim

Korea University Business School; European Corporate Governance Institute (ECGI); Asia Corporate Governance Institute (AICG)

Date Written: July 9, 2011


Outside directors and audit committees are widely considered to be central elements of good corporate governance. We use a 1999 Korean law as an exogenous shock to assess how board structure affects firm market value. The law mandates 50% outside directors and an audit committee for large public firms, but not smaller firms. We study how this shock affects firm market value, using event study, difference-in-differences, and instrumental variable methods, within a regression discontinuity approach. The legal shock produces large share price increases for large firms, relative to mid-sized firms; share prices jump in 1999 when the reforms are announced.

In a companion paper, Bernard Black, Woochan Kim, Hasung Jang and Kyung-Suh Park, How Corporate Governance Affects Firm Value: Evidence on Channels from Korea (working paper 2011),, we provide evidence on the channels through which governance may affect firm value.

For our earlier cross-sectional research on Korean corporate governance, see:

Bernard Black, Hasung Jang and Woochan Kim, Does Corporate Governance Affect Firms' Market Values? Evidence from Korea,: 22 Journal of Law, Economics and Organization 366-413 (2006), nearly final version at

Bernard Black, Hasung Jang & Woochan Kim, Predicting Firms' Corporate Governance Choices: Evidence from Korea, 12 Journal of Corporate Finance 660-691 (2006), nearly final version at

Keywords: Korea, outside directors, audit committees, corporate governance, board of directors, emerging markets

JEL Classification: G32, G34

Suggested Citation

Black, Bernard S. and Kim, Woochan, The Effect of Board Structure on Firm Value: A Multiple Identification Strategies Approach Using Korean Data (July 9, 2011). Journal of Financial Economics (JFE), 2011; U of Texas Law, Law and Econ Research Paper No. 89; McCombs Research Paper No. FIN-02-07; ECGI - Finance Working Paper No. 179/2007; KDI School of Pub Policy & Management Paper No. 07-02; EFA 2007 Ljubljana Meetings Paper. Available at SSRN:

Bernard S. Black (Contact Author)

Northwestern University - Pritzker School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States
312-503-2784 (Phone)

Northwestern University - Kellogg School of Management

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-5049 (Phone)

European Corporate Governance Institute (ECGI)


Woochan Kim

Korea University Business School ( email )

LG-POSCO Bldg #524
Anam-Dong, Seongbuk-Ku
Seoul, Seoul 136701
+822-3290-2816 (Phone)
+822-922-7220 (Fax)


European Corporate Governance Institute (ECGI) ( email )

B-1050 Brussels

Asia Corporate Governance Institute (AICG) ( email )

1, 5-ga, Anam-dong
Seoul, 136-701
Korea, Republic of (South Korea)

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