Corporate Governance, Commitment to Business Ethics, and Firm Valuation: Evidence from the Korean Stock Market [Book Review]

Journal of Business Ethics 100 (2):323 - 348 (2011)

A variety of stakeholders have long been interested in the factors that are related to firm valuation. This article investigates why companies with more comprehensive corporate governance (CG) have a value premium over companies with less comprehensive CG. We posit and find that the cost of equity capital (COC) decreases with the strength of CG, suggesting that the value premium stems from the lower COC for more comprehensive CG. We also find that the COC is lower for companies with strong commitment to business ethics (BE) than for those with weak commitment to BE and that the beneficial effect of CG on the COC is more pronounced for companies with weak commitment to BE than for those with strong commitment to BE. Companies with more comprehensive CG tend to exhibit strong commitment to BE, but the beneficial effect of corporate ethical commitment is not completely subsumed by CG. Our results suggest that companies could lower their cost of equity capital and increase firm value by adopting more comprehensive CG practices and committing to higher standards of BE
Keywords analysts’ forecasts  business ethics  corporate governance  cost of capital  valuation
Categories (categorize this paper)
DOI 10.1007/s10551-010-0682-z
Edit this record
Mark as duplicate
Export citation
Find it on Scholar
Request removal from index
Revision history

Download options

Our Archive

Upload a copy of this paper     Check publisher's policy     Papers currently archived: 39,607
External links

Setup an account with your affiliations in order to access resources via your University's proxy server
Configure custom proxy (use this if your affiliation does not provide a proxy)
Through your library

References found in this work BETA

The Challenge of Ethical Behavior in Organizations.Ronald R. Sims - 1992 - Journal of Business Ethics 11 (7):505 - 513.

View all 24 references / Add more references

Citations of this work BETA

Add more citations

Similar books and articles

Are East Asian Companies Benefiting From Western Board Practices?John Nowland - 2008 - Journal of Business Ethics 79 (1-2):133 - 150.
A Partnership Model of Corporate Ethics.Greg Wood - 2002 - Journal of Business Ethics 40 (1):61 - 73.
Governance and Social Information Disclosure Evidence From the UK.Sepideh Parsa, Reza Kouhy & Christos Tzovas - 2007 - International Journal of Business Governance and Ethics 3 (3):205-222.
Corporate Governance Practices in Publicly Quoted Companies in Nigeria.Chris Ogbechie & Dimitrios N. Koufopoulos - 2007 - International Journal of Business Governance and Ethics 3 (4):350-381.
Corporate Scandals and Capital Structure.Stefano Bonini & Diana Boraschi - 2010 - Journal of Business Ethics 95 (S2):241 - 269.


Added to PP index

Total views
22 ( #347,115 of 2,325,381 )

Recent downloads (6 months)
6 ( #271,520 of 2,325,381 )

How can I increase my downloads?


My notes

Sign in to use this feature