Foreign board membership and firm value in Korea

Abstract

PurposeThis paper seeks to explore such questions as: “What are the impacts of foreign investors and what are the channels through which foreign investors contribute to or detracts from firm value in Korea?” It aims to discuss how foreign investors and foreign outside directors interact to enhance firm value.Design/methodology/approachUsing longitudinal data from the KOSPI200 index in Korea during 2004‐2007, the study examined the direct and interaction effect of foreign blockholders and foreign board members. To address the representativeness of foreign investors, the authors verified the mandates of foreign board members though telephone interviews.FindingsForeign block shareholders and foreign outside directors respectively provide expertise and independent monitoring over management. Foreign blockholders' management control via board membership is likely to mitigate leverage of value enhancement when foreign outside directors represent private interests of foreign blockholders. The moderating effect is also supported since foreign ownership concentration has an inverted U‐shaped relationship with value enhancement. The paper confirms that board independence reinforces the positive impact of foreign outside directors on firm value.Research limitations/implicationsThis study offers a key to understanding corporate governance in that mutual monitoring and a balance among various types of stakeholders are crucial to value enhancement.Originality/valueThe paper provides clues to the extant diverse findings concerning the impact of foreign investors on firm value. It applies an integrated perspective to the empirical analyses of the impact of foreign investors by giving consideration to the agency – foreign outside directors – to implement management control on behalf of foreign blockholders.

Impact of foreign ownership on capital structure and firm value in emerging market: case of Amman Stock Exchange listed firms

“…The result shows that the effect of foreign ownership on operating profits has been initially insignificant, but is starting to show up strongly in the more recent period. Choi et al (2012), in their study on a sample of non-financial firms in the Korean Exchange's KOSP1200 index in for years from 2004 to 2007, investige the impacts of foreign investors on firms' value in Korea. The results prove that foreign ownership is positively related to the firms' value, and that foreign outside directors boost the firms value when there is not much foreign ownership.…”

Pengaruh Komisaris Asing, Direktur Asing Dan Kepemilikan Asing Terhadap Kinerja Intellectual Capital

“…Diversitas ini terjadi karena adanya pengaruh kepemilikan asing yang menempatkan anggota dewan untuk melindungi kepentingan mereka (Choi, Sul & Min, 2012). Selain untuk melindungi kepentingan, adanya diversitas kewarganegaraan juga dianggap menguntungkan bagi perusahaan karena pada saat ini aktivitas bisnis membutuhkan berbagai macam perspektif untuk menghadapi masalah yang dihadapi (Walt & Ingley, 2003).…”

“…Penemuan tersebut serupa dengan penelitian Choi, Sul & Min (2012), yang menyatakan bahwa Direktur asing memiliki kemampuan yang lebih dalam hal manajerial. Polovina & Peasnell (2015) mengemukakan bahwa dengan adanya Direktur asing maka akan dapat meningkatkan kemampuan Dewan Direksi karena adanya kemampuan dan pengalaman yang baru.…”

The Emergence Of Human Capital Disclosure: Exploring The Influence Of Board Composition

“…However, Choi, Sul, and Min (2012) stipulated that the presence foreign directors could enhance the value and more focused in improving the governance and monitoring on management's activities. Thus, foreign directors have no interest in managing HCD as their responsibility is more towards enhancing the company's value and to increase governance.…”

“…The result shows the higher the number of foreign directors led to the lower the level of HCD. According to Choi et al (2012), HCD level is low as foreign directors in the companies are more focused more in improving the monitoring of management activities.…”