The Relationship between Corporate Governance and Firm Value -A Comparative Study-

This paper mainly discuss about that explain if there exists any relationship between corporate governance and firm value. Based on the prior research that corporate governance would play a role reducing the agency cost producing by the separation of ownership, this study to verify that corporate governance would reduce the firms’ financing cost. Specifically, the firms with high corporate governance are predicted to have higher profitability and firm value measured by Tobin’s Q. This study examined theses hypotheses, using a sample of 5,785 on Korean firms over ten-year period (2004-2013) and a number of 7,777 for the Chinese sample data over. An index published by Korean Corporate Governance Service (KCGS) and a RKS of China were used as the measure of corporate governance. The results of this paper find that the good corporate governance enhance the firm value measured by Tobin’s Q.