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Outsider Board Activity, Ownership Structure and Firm Value: Evidence from Korea


  • We thank Jerry Bowman, Adrian Cheung, Yul Kwon, Janice How, an anonymous referee and seminar participants at the Queensland University of Technology for their helpful comments and suggestions. We also thank the Korean Corporate Governance Service (KCGS) for providing us with detailed corporate governance data on Korean firms and the Griffith University for financial support provided.

Byung-Seong Min

Department of International Business and Asian Studies

Griffith University

Nathan Campus

170 Kessels Road

Brisbane, Qld 4111



Using a sample of publicly listed firm in Korea from 2002 to 2006, this article examines the impact of board monitoring on firm value and productivity. We use outsider's attendance of board meetings as a proxy for board monitoring. Consistent with the commitment hypothesis, we find that outsider's attendance rate increases firm value, suggesting that attending board meeting itself is a strong signal that reflects outsider's intention to monitor insiders. While ownership of controlling shareholders negatively affects firm value, this relationship is not moderated by increased monitoring by outsiders. Our findings provide further evidence that the outside director system is less effective in chaebol-affiliated firms. Results also indicate that the effect of outsider's board monitoring activity on investor's valuation of the firm is greater than on productivity improvement of the firm. Our conclusions are robust for possible endogeneity in the relationship between firm value and board attendance by outside directors.

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