Piman Limpaphayom

Do Investors Really Value Corporate Governance? Evidence from the Hong Kong Market

To examine the relation between corporate governance and firm value, we develop an instrument to assess the corporate governance practices of listed companies in Hong Kong. Based on the Revised OECD Principles of Corporate Governance (OECD) and the Code of Best Practices (HKEx), we construct a corporate governance index (CGI) for Hong Kong listed companies. Unlike measures used in other studies, the CGI score reflects the presence of good corporate governance practices as well as variation in the quality of corporate governance practices. Empirical evidence shows that a companys market valuation is positively related to its overall CGI score, a composite measure of a firms corporate governance practices. We also find that the transparency component of the CGI score drives the relation with market valuation. In summary, this study provides supporting evidence for the notion that, in Hong Kong, good corporate governance practices are consistent with value maximization.

Corporate Governance in China: A Step Forward

Recently, the presumed benefits of corporate governance have become one of the most contentious issues especially for emerging markets in Asia where institutional settings are quite different from other parts of the world. Using an internationally accepted benchmark (OECDs Principles of Corporate Governance, OECD, 2004), this study evaluates the progress of corporate governance practice of Chinese listed companies. A corporate governance index (CGI) is constructed to measure the quality of corporate governance practices of the 100 largest listed firms in China during 2004-2006. The results show that Chinese companies have been making progress in the corporate governance reform. The findings also show a positive relation between market valuation and overall corporate governance practices, as measured by the CGI, among these Chinese listed companies. Additional investigation reveals that the rights of shareholders are the main driver in the relationship.

The effect of economic regimes on the relation between term structure and real activity in Japan

Note: This is a description of the paper, not the abstract. Previous research finds that the Japanese term structure of interest rates, as defined by the long-term interest rate minus the short-term interest rate, fails to predict future Japanese economic activity, as defined by changes in GDP. The failure to find a relationship between the two variables is surprising because in almost all other developed economies, a positive relationship is prevalent. Our paper makes two key contributions to the literature. First, we offer an explanation for the inability of prior research to find a positive relationship between these two variables. Specifically, we describe the existence of two distinct economic regimes that have existed in Japans recent history. During the period from 1975 to 1983, Japanese authorities tightly regulated interest rates and restricted financial market activities. In contrast, the period from 1984 to 1991 represents a time of financial market liberalization. Therefore, we contend that the term structure contains un-informative information for predicting economic activity in the first period, but that the market forces that were allowed to prevail in the latter period should permit the well known positive relationship between these two variables to persist. Overall, we do find a positive relationship between the term structure and economic activity in the latter period of our study, while no significant relationship emerges from the first period. These findings are consistent with our hypothesis. Finally, the second main contribution of our paper is that we employ a generalized method of moments (GMM) methodology to conduct our study. This methodology represents an improvement over prior term structure studies.

Ownership structure and post-issue operating performance of firms conducting seasoned equity offerings in Thailand

This paper investigates the post-issue operating performance of companies that conducted seasoned equity offerings (SEO) in the Stock Exchange of Thailand (SET) during the period 1991 to 1994. It is documented that SEO firms exhibited declining operating performance after the offering. Further, there is a negative relation between inside ownership concentration and postissue operating performance decline. In support of the signaling effect, the ratio of issue proceeds to pre-issue equity also negatively relates to post-issue operating performance. Further, the negative relation between issue proceeds and operating performance decline is intensified among SEO firms with high insider ownership concentration. The finding offers evidence in support of agency conflicts and information asymmetry and suggests that the two factors are operating simultaneously.

Corporate Governance and Firm Valuation in Asian Emerging Markets

One of the most contentious issues in the corporate governance debate is the presumed benefits of adopting internationally accepted corporate governance practices. This study investigates the relation between the quality of corporate governance practices and market valuation for listed firms in five Asian economies: China, Hong Kong, Indonesia, the Philippines, and Thailand. Based on the OECD Corporate Governance Principles (Organization of Economic Co-operation and Development, 1999), we use a survey instrument to assess the quality of corporate governance practices of listed companies in these Asian emerging markets. The new instrument represents an improvement over existing instruments as it is more comprehensive, covering five aspects of corporate governance (rights of shareholders, treatment of shareholders, roles of stakeholders, disclosure and transparency, and board responsibilities). The survey instrument also captures variation in the quality of governance practices across firms. The empirical results show there is a positive relation between the quality of corporate governance practices and firm value in each of the five nations.

ORGANIZATION STRUCTUREAND CORPORATE DEMANDFOR REINSURANCE : THE CASEOFTHE JAPANESE KEIRETSU: JAPANESE KEIRETSU AND REINSURANCE

This study investigates the impact of organization structure on corporate demand for reinsurance. Previous research has shown that the unique corporate groupings in Japan known as the “keiretsu” have relatively low bankruptcy costs, low agency conflicts, low information asymmetry and low effective taxes. These conditions should mitigate the benefits of reinsurance purchase. This conjecture is tested by examining demand for reinsurance of Japanese non-life insurance companies during 1974-2010. Consistent with the prediction, keiretsu non-life insurers have lower reinsurance purchase than independent non-life insurance companies. The effects of the keiretsu structure also receded when keiretsu groupings’ power was weakened after the asset bubble burst and the breakdown of the convoy system in mid 1990s. Consistent with previous studies, Japanese mutual insurers also purchase more reinsurance than stock insurers.