Voluntary Disclosure of Corporate Governance Report and Firm Value
Asian Tax Journal Vol. 21 No. 2 (2020), pp. 127-156
Abstract
In March 2017, Korea Financial Services Commission introduced the Corporate Governance Disclosure System which is 「Comply or Explain」 approach and voluntary and it had been operated for two years. This study examines the effect of voluntary disclosure of corporate governance reports on firm’s value with listed companies during this period. The results of this study are summarized as follows. First, the voluntary disclosure of corporate governance reports has a positive effect on the firm’s value measured by Tobin’s q, etc. It is interpreted that the disclosure of the Corporate Governance Report played a significant positive role in mitigating information asymmetry between firms and investors. Second, as a result of examining the incremental effects of corporate governance, the weaker the corporate governance structure, the greater the impact of the disclosure on the corporate governance report on firm’s value. In other words, companies with good corporate governance have little or no additional information effect of the disclosure of corporate governance report on their corporate value, but those with weak corporate governance have a significantly positive effect on their corporate value. It is interpreted that in the case of companies with weak corporate governance, the disclosure of corporate governance reports resulted in a positive functional role in mitigating the information asymmetry to the corporate governance and leading to significant improvements its’ firm value. The Financial Services Commission of Korea explained that the purpose of introducing the Corporate Governance Disclosure System is to enhance the management transparency and long－term corporate value of listed companies in Korea. In this regard, the results of this study support the validity of policy of expanding the disclosure system for corporate governance reports by identifying the disclosures on corporate governance have a significant correlation with firm value and verifying the positive role of the Corporate Governance Disclosure System.
Keywords
- Corporate Governance Reports
- Voluntary Disclosures
- Firm Value
- Information Asymmetry
Related Articles
The Effect of Insider Trading on Management Voluntary Disclosures
15(3) 145-173
Corporate Sustainability and the Frequency of Corporate Disclosure
19(5) 211-242
The Effect of the Voluntary Earnings Forecasts Disclosure on the Earnings Management
15(5) 263-291
Firm's Characteristics of the Voluntary Disclosure Based on XBRL
10(1) 249-277
Optimistic Preliminary Earnings Announcements and Characteristicsof Outside Directors
7(4) 133-151