Audit committees, corporate governance, and shareholder wealth: Evidence from Korea

    Authors

    Y. K. Choi; S. H. Han;S. Lee

    Comments

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    Abbreviated Journal Title

    J. Account. Public Policy

    Keywords

    ASIAN FINANCIAL CRISIS; DIVERSIFIED BUSINESS GROUPS; INTERNAL; CAPITAL-MARKETS; FIRM VALUE; INDEPENDENCE; DIRECTORS; CHAEBOLS; BOARD; PERFORMANCE; MANAGEMENT; Business, Finance; Public Administration

    Abstract

    This paper examines the effect of audit committee appointments on shareholder wealth in Korea after the Asian financial crisis. We find that stock prices generally increase with audit committee appointments. In contrast, chaebol (business group) affiliates and firms switching audit committee membership are associated with significantly lower stock returns, probably due to the management's opportunistic behavior. However, the independence and financial literacy of the audit committee members appear to mitigate the opportunistic behavior. Therefore, our result confirms that the characteristics of the audit committee strengthen or weaken the existing corporate governance. We discuss the implications of our results obtained under Korea's unique corporate governance structure. (C) 2014 Elsevier Inc. All rights reserved.

    Journal Title

    Journal of Accounting and Public Policy

    Volume

    33

    Issue/Number

    5

    Publication Date

    1-1-2014

    Document Type

    Article

    Language

    English

    First Page

    470

    Last Page

    489

    WOS Identifier

    WOS:000343371900003

    ISSN

    0278-4254

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