The purpose of this paper is to explore the relationship between corporate governance and firm value at different stages of the corporate life-cycle.
The authors use two measures, commonly employed in the literature, to differentiate between “immature” and “mature” firms, and estimate separate governance-value regressions for each set of firms.
The findings suggest that it is differences in the resource/strategic governance functions, which manifest in young firms which result in differences in value across firms, all else equal. The authors find no relationship between governance and firm value for older firms. Hence, differences in the monitoring aspect of governance between mature firms are not rewarded with a value premium.
The findings imply that the strategic and resource roles of governance are “must haves” for firms since firms that score highly on these fronts are valued more highly. In contrast, differences in the monitoring aspect of governance are not rewarded, suggesting that effective monitoring is not a necessity, but rather a “nice to have”. The analysis is limited to a small sample of emerging market firms, and it would be of interest to extend this analysis to a larger and broader sample of firms.
The findings suggest that corporate governance is not valued at all stages of the corporate life-cycle.
O'Connor, T. and Byrne, J. (2015), "When does corporate governance matter? Evidence from across the corporate life-cycle", Managerial Finance, Vol. 41 No. 7, pp. 673-691. https://doi.org/10.1108/MF-11-2013-0306Download as .RIS
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