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Does Corporate Governance Predict Future Performance? Evidence from Hong Kong
Author(s) -
Cheung YanLeung,
Connelly J. Thomas,
Jiang Ping,
Limpaphayom Piman
Publication year - 2011
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/j.1755-053x.2010.01138.x
Subject(s) - corporate governance , valuation (finance) , business , accounting , china , market value , index (typography) , finance , world wide web , political science , computer science , law
This study uses time‐series data to examine the relation between changes in the quality of corporate governance practices and subsequent market valuation among large listed companies in Hong Kong. The results indicate that firms that exhibit improvements in the quality of corporate governance display a subsequent increase in market valuation, whereas firms that exhibit deterioration in the quality of corporate governance practices tend to encounter a decline in market valuation. Additionally, the impact is greater for firms that are included in the MSCI index or with a China affiliation. The results provide evidence in support of the notion that good corporate governance can predict future market valuation.