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Asian Review of Financial Research, Vol., No..
pp.80~118
pp.80~118
How the Interaction between Product Market Competition and Corporate Governance affect Corporate Decision?
Hee Sub Byun Korea University Business School
Ji Hye Lee Korea University Business School
Kyung Suh Park Korea University Business School
This paper investigates the main channels of increased firm value when product market competition and corporate governance interact to affect corporate behavior and therefore firm value. Empirically, we confirm that corporate governance has a significantly negative effect on corporate payout and investment expenditure in non-competitive market while this effect disappears or decreases in competitive market. These results are robust to alternative measures of corporate governance and product market competition. We conclude that the substitution effect between product market competition and corporate governance on firm value and operating performance observed in existing literatures is due to the disciplined payout and investment policy.
Hee Sub Byun
Ji Hye Lee
Kyung Suh Park
This paper investigates the main channels of increased firm value when product market competition and corporate governance interact to affect corporate behavior and therefore firm value. Empirically, we confirm that corporate governance has a significantly negative effect on corporate payout and investment expenditure in non-competitive market while this effect disappears or decreases in competitive market. These results are robust to alternative measures of corporate governance and product market competition. We conclude that the substitution effect between product market competition and corporate governance on firm value and operating performance observed in existing literatures is due to the disciplined payout and investment policy.
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