Corporate governance and firm performance: Evidence from Korea during the global financial crisis

Abstract

This paper examines the relationship between corporate governance and Korean firm performance during the Global Financial crisis. Using 557 Korean firm-specific data on corporate governance in terms of ownership structure, we found that foreign investor ownership and blockholder ownership have a positive relationship with firm performance during the global financial crisis while minority interest ownership exhibits a negative relationship. We explain that foreign investors’ objectivity and expertise allow the investment to beat the market and that blockholder ownership provides protection against expropriation of minority interest. Additionally, we observe how particular characteristics of firms such as chaebol and board committee index affect such relationship. Overall, this study emphasizes the importance of ownership structure in terms of corporate governance especially in times of crises.