The impact of corporate governance on corporate performance: Evidence from Japan
Available online at www.sciencedirect.com
Pacific-Basin Finance Journal 16 (2008) 236 – 251 www.elsevier.com/locate/pacfin The impact of corporate governance on corporate performance: Evidence from Japan ☆
Rob Bauer a , Bart Frijns b,c,⁎, Rogér Otten a,d , Alireza Tourani-Rad c a b
Limburg Institute of Financial Economics, Maastricht University, The Netherlands
Nijmegen School of Management, Radboud University Nijmegen, The Netherlands c Department of Finance, Auckland University of Technology, New Zealand d AZL Fiducional, The Netherlands
Received 27 September 2005; accepted 22 May 2007
Available online 16 August 2007
Abstract
Employing a unique data set provided by Governance Metrics International, which rates firms using six different corporate governance dimensions, we analyze whether Japanese firms with many governance provisions have a better corporate performance than firms with few governance provisions. Employing an overall index, we find that well-governed firms significantly outperform poorly governed firms by up to 15% a year. Using indices for various governance categories, we find that not all categories affect corporate performance. Governance provisions that deal with financial disclosure, shareholder rights, and remuneration do affect stock price performance. The impact of provisions that deal with board accountability, market for control, and corporate behavior is limited.
© 2007 Elsevier B.V. All rights reserved.
JEL classification: C21; C22; G34
Keywords: Corporate governance; Corporate performance
☆
We wish to thank Governance Metrics International for sharing their governance data. We also would like to thank an anonymous referee, the editor (Ghon Rhee), and participants of the Inaugural Asia-Pacific Corporate Governance
Conference, Hong Kong, 2005, the 3rd International Conference on Corporate Governance, Birmingham, U.K, 2005, the
13th Global Finance conference, Rio de Janeiro, Brazil, 2006, and the
Pacific-Basin Finance Journal 16 (2008) 236 – 251 www.elsevier.com/locate/pacfin The impact of corporate governance on corporate performance: Evidence from Japan ☆
Rob Bauer a , Bart Frijns b,c,⁎, Rogér Otten a,d , Alireza Tourani-Rad c a b
Limburg Institute of Financial Economics, Maastricht University, The Netherlands
Nijmegen School of Management, Radboud University Nijmegen, The Netherlands c Department of Finance, Auckland University of Technology, New Zealand d AZL Fiducional, The Netherlands
Received 27 September 2005; accepted 22 May 2007
Available online 16 August 2007
Abstract
Employing a unique data set provided by Governance Metrics International, which rates firms using six different corporate governance dimensions, we analyze whether Japanese firms with many governance provisions have a better corporate performance than firms with few governance provisions. Employing an overall index, we find that well-governed firms significantly outperform poorly governed firms by up to 15% a year. Using indices for various governance categories, we find that not all categories affect corporate performance. Governance provisions that deal with financial disclosure, shareholder rights, and remuneration do affect stock price performance. The impact of provisions that deal with board accountability, market for control, and corporate behavior is limited.
© 2007 Elsevier B.V. All rights reserved.
JEL classification: C21; C22; G34
Keywords: Corporate governance; Corporate performance
☆
We wish to thank Governance Metrics International for sharing their governance data. We also would like to thank an anonymous referee, the editor (Ghon Rhee), and participants of the Inaugural Asia-Pacific Corporate Governance
Conference, Hong Kong, 2005, the 3rd International Conference on Corporate Governance, Birmingham, U.K, 2005, the
13th Global Finance conference, Rio de Janeiro, Brazil, 2006, and the