Corporate Governance and Firm Survival : Evidence from Korea

This paper investigates into the effects of various corporate governance mechanisms on the corporate survivability by applying survival analysis techniques to Korean manufacturing firms listed in the KOSPI and the KOSDAQ markets as of December 2002. The empirical result shows that ownership concentration, insider ownership to a certain degree, dividend payout, and leverage for companies with lower capital growth have proved to be effective governance mechanisms in Korea from the corporate survival perspective in the long run. To be specific, concentrated ownership and higher dividend payout have been verified to contribute to longer firm survival while insider ownership, as it increases, at first contributes to firm survival and later promotes corporate delisting. However, the monitoring role of creditors has been confirmed only relatively more effective for firms with lower capital growth. In addition, smaller board size has turned out effective, although statistically weakly, as a corporate governance mechanism in the long run and there has proved to be an optimal level of board size although the statistical significance is rather weak.