How does corporate governace pay off? Evidence from Korean stock listings

Paul Moon Sub Choi, Joung Hwa Choi, Mookyong Son

Research output: Contribution to journalArticlepeer-review

Abstract

Corporate governance is an envelope for the mechanisms, processes and relations through which corporations are controlled and guided. Consequently, corporate governance affects operational performance and, in turn, stock returns, as Gompers et al. (2003) find. In this research, we use the Korea Corporate Governance Stock Price Index (KOGI) to test a possible linkage between corporate governance and shareholder wealth in Korea. Factor mimicking portfolios sorted per KOGI are constructed to estimate a corporate governance risk factor ("good minus bad"). By augmenting this new factor to the existing factor models (Fama and French, 1993; Carhart, 1997) to fit multiply imputed data, we find evidence that corporate governanceinfluences stock pricing in Korea.

Original languageEnglish
Pages (from-to)225-230
Number of pages6
JournalInvestment Management and Financial Innovations
Volume13
Issue number4
DOIs
StatePublished - 2016

Bibliographical note

Funding Information:
This work was supported by the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2016S1A5B5A07915509).

Publisher Copyright:
© Paul Moon Sub Choi, Joung Hwa Choi, Mookyong Son, 2016.

Keywords

  • CG
  • Factor-mimicking portfolio
  • Long-short portfolio
  • Multiple imputation
  • Risk factor

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