The Effectiveness Of Corporate Governance Code Revisions: The International Evidence

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Date
2018-05
Authors
Ooi, Chai Aun
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Publisher
Universiti Sains Malaysia
Abstract
The literature lacks empirical evidence to show the effectiveness of progressive revisions on the national codes of corporate governance. Using firm-level data from 35 countries, this study shows that progressive corporate governance code revisions have significantly moderated the relationship between corporate governance score and firm value. Majority of the countries selected in this study has at least more than one code revision covered as the use of a panel data covering the years from 2007 to 2014. In detail, this study assesses corporate governance code revisions from three perspectives, i.e. the cumulative number of corporate governance code revisions, the number of new governance practices released in each revision, and the years of compliance with the codes. Additional tests are conducted by running the main regression model on four sub-aspects of corporate governance, i.e. board function, board structure, compensation policy and shareholder rights protection. Sensitivity tests are conducted to examine if the effects of countries’ economic performance, institutional governance quality, the 2008 financial crisis, sample selection bias, regime effect of corporate governance code revisions, and the alternative dependent variables are able to affect the main findings. Robustness tests regarding the influence of firms’ internal corporate governance standard in existence and the influence of capital market pressure to the effectiveness of corporate governance code revisions have been conducted. Also, the effectiveness of corporate governance code revisions in developed and developing countries are examined. This study shows that the cumulative number of corporate governance code revisions has a significant positive moderating effect to the relationship with corporate governance score and firm value. Instead, increasing the number of new governance practices released from corporate governance code revisions has a significant negative moderating effect to the relationship.
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Keywords
Progressive corporate governance code revisions , relationship between corporate governance score
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