The Effect of Accessibility of Shareholders' Meeting on Firm Value : Evidence from Korea

We investigate the impact of accessibility of shareholder meetings on firm value. We payattention to the general shareholders' meeting because the shareholders' meeting is an event in whichimportant matters about the company's management activities are determined, and shareholders canmonitor by presenting their opinions to the management. Existing studies report that institutionalinvestors' monitoring increases firm value by reducing agent costs. Despite the advantages ofmonitoring, monitoring activities incur costs. This study analyzes the impact of monitoring costs onmonitoring activities and firm value. The monitoring costs are based on the distance between Seouland the shareholders' meeting, referring to the relevant literature. We find that as the distance betweenthe shareholders' meeting and Seoul where the institutional investors are concentrated increases, thefirm value declines. We also find evidence that accessibility of shareholders' meeting influences themonitoring intensity through regression analysis using analyst coverage. That is, as the monitoringcosts increase, the monitoring intensity decreases, which exacerbates the firm value. In particular,the adoption of an electronic voting system has significant implications as an exogenous event thatimproves accessibility. In order to support this argument, this study analyzes how the effect ofintroducing the electronic voting system varies according to the distance from Seoul to the generalmeeting of shareholders. As a result, the effect of adopting the electronic voting system dependson the distance from Seoul to the meeting place of shareholders. The introduction of the electronicvoting system complements the physical constraints, so the greater the physical distance, the greaterthe effect. We also pay attention to analyst analysis activity as a key indicator of monitoring intensity.This paper is quite meaningful in that it analyzes the relationship between monitoring cost, monitoringintensity and firm value in Korean stock market.