Do investors really value corporate governance? Evidence from the Hong Kong market

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

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Author(s)

  • Yan-Leung Cheung
  • J. Thomas Connelly
  • Piman Limpaphayom
  • Lynda Zhou

Related Research Unit(s)

Detail(s)

Original languageEnglish
Pages (from-to)86-122
Journal / PublicationJournal of International Financial Management and Accounting
Volume18
Issue number2
Publication statusPublished - Jun 2007

Abstract

To examine the relation between corporate governance and firm value, we develop an instrument to assess the corporate governance practices of listed companies in Hong Kong. Based on the Revised OECD Principles of Corporate Governance (OECD) and the Code of Best Practices (HKEx), we construct a corporate governance index (CGI) for Hong Kong listed companies. Unlike measures used in other studies, the CGI score reflects the presence of good corporate governance practices as well as variation in the quality of corporate governance practices. Empirical evidence shows that a company's market valuation is positively related to its overall CGI score, a composite measure of a firm's corporate governance practices. We also find that the transparency component of the CGI score drives the relation with market valuation. In summary, this study provides supporting evidence for the notion that, in Hong Kong, good corporate governance practices are consistent with value maximization. © Blackwell Publishing Ltd. 2007.

Citation Format(s)

Do investors really value corporate governance? Evidence from the Hong Kong market. / Cheung, Yan-Leung; Connelly, J. Thomas; Limpaphayom, Piman; Zhou, Lynda.

In: Journal of International Financial Management and Accounting, Vol. 18, No. 2, 06.2007, p. 86-122.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review