Foreign Board Membership and Firm Value in Korea Hyang Mi Choi, Wonsik Sul, Sang Kee Min

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Management Decision
Emerald Article: Foreign board membership and firm value in Korea Hyang Mi Choi, Wonsik Sul, Sang Kee Min

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To cite this document: Hyang Mi Choi, Wonsik Sul, Sang Kee Min, (2012),"Foreign board membership and firm value in Korea", Management Decision, Vol. 50 Iss: 2 pp. 207 - 233 Permanent link to this document: http://dx.doi.org/10.1108/00251741211203533 Downloaded on: 18-11-2012 References: This document contains references to 72 other documents To copy this document: permissions@emeraldinsight.com

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Foreign board membership and firm value in Korea
Hyang Mi Choi
College of Business Administration, Seoul National University, Seoul, Korea

Foreign board membership

207

Wonsik Sul
College of Economics and Business Administration, Sookmyung Women’s University, Seoul, Korea, and

Sang Kee Min
College of Business Administration, Seoul National University, Seoul, Korea Abstract
Purpose – This paper seeks to explore such questions as: “What are the impacts of foreign investors and what are the channels through which foreign investors contribute to or detracts from firm value in Korea?” It aims to discuss how foreign investors and foreign outside directors interact to enhance firm value. Design/methodology/approach – Using longitudinal data from the KOSPI200 index in Korea during 2004-2007, the study examined the direct and interaction effect of foreign blockholders and foreign board members. To address the representativeness of foreign investors, the authors verified the mandates of foreign board members though telephone interviews. Findings – Foreign block shareholders and foreign outside directors respectively provide expertise and independent monitoring over management. Foreign blockholders’ management control via board membership is likely to mitigate leverage of value enhancement when foreign outside directors represent private interests of foreign blockholders. The moderating effect is also supported since foreign ownership concentration has an inverted U-shaped relationship with value enhancement. The paper confirms that board independence reinforces the positive impact of foreign outside directors on firm value. Research limitations/implications – This study offers a key to understanding corporate governance in that mutual monitoring and a balance among various types of stakeholders are crucial to value enhancement. Originality/value – The paper provides clues to the extant diverse findings concerning the impact of foreign investors on firm value. It applies an integrated perspective to the empirical analyses of the impact of foreign investors by giving consideration to the agency – foreign outside directors – to implement management control on behalf of foreign blockholders. Keywords Foreign ownership, Foreign board...
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