Monitoring effects of independent board on firm value during the global financial crisis

Abstract

This paper examines whether the corporate governance reform in emerging markets after the East Asian financial crisis of the late 1990s was effective in 2008. This study tests the impact from the global financial crisis of 2008 on the expropriation effect in Korea. First, we find that expropriation by controlling shareholders exists in non-chaebol firms. Second, however, we find evidence that independent board structures restrain expropriation by controlling shareholders in non-chaebol firms. Overall, we suggest that emerging markets still experience a firm value discount from expropriation, but reforms in corporate governance can mitigate the expropriation effect.