Does Corporate Governance Predict Firms’ Market Values? Evidence from Korea

ArXiv ID: ssrn-311275 “View on arXiv”

Authors: Unknown

Abstract

We report strong OLS and instrumental variable evidence that an overall corporate governance index is an important and likely causal factor in explaining

Keywords: corporate governance, OLS regression, instrumental variables, firm value, ownership structure, Equities (Corporate Governance)

Complexity vs Empirical Score

• Math Complexity: 2.0/10
• Empirical Rigor: 7.0/10
• Quadrant: Street Traders
• Why: The paper primarily uses OLS and instrumental variable (IV) regression methods without advanced mathematical derivations, placing math complexity at a low level. However, it demonstrates high empirical rigor with a clear backtest-ready design, including a proprietary index (KCGI), instrumental variables based on Korean legal rules, and sensitivity checks on market value metrics.

  flowchart TD
    A["Research Question: Does Corporate Governance<br>predict Korean firms' market value?"]
    A --> B["Data & Inputs<br>Firm-level governance & value data from Korea"]
    B --> C["Methodology: Core Analysis"]
    C --> D["OLS Regression<br>Initial association estimates"]
    C --> E["Instrumental Variables<br>Address endogeneity, estimate causal effect"]
    D & E --> F["Key Findings<br>Governance index significantly explains<br>and likely causes higher firm value"]