How Corporate Governance Influences Business Performance: Evidence Using Korea's Chaebol Panel Data

Using available panel data on Korea's 29 Chaebols covering the years 2003∼2005, the empirical results suggest that each of the five corporate governance indicators (the corporate governance composite index, the shareholder rights subindex, the board structure subindex, the board procedure subindex, and the transparency subindex) makes a substantial contribution to higher business performance measured as the market value‐to‐book value ratio for firm valuation and as return on equity for management performance. On the basis of the regression results, transparency is the most important factor in explaining the business performance of Korea's Chaebols.