Resumen de Board structure, corporate governance and firm value: evidence from Hong Kong

Adrian C. H. Lei, Frank M. Song

• This article investigates the effects of board structure and internal Corporate-Governance (CG) mechanisms on firm value in an emerging market with concentrated ownership and family involvement. Using a unique Hong Kong (HK) panel dataset from 2001 to 2009, we create a board-structure index that captures board independence, balance of power and conflicts of interest. We also construct other major CG mechanisms to correctly specify our model. We combine the 13 CG attributes, which consist of binary and continuous variables, with four CG mechanisms, using Principal Component Analysis (PCA). In contrast with prior evidence from developed markets, our results indicate that firms with independent board structure are associated with higher firm value and are both statistically and economically significant. The results also suggest that board structure is the most important among the major internal CG mechanisms.