Board Reforms and Firm Value: Worldwide Evidence

Abstract

We examine the impact of corporate board reforms on firm value in 41 countries. Using a difference-in-differences design, we find that board reforms increase firm value. Reforms involving board and audit committee independence, but not reforms involving separation of chairman and CEO positions, drive the valuation increases. In addition, while comply-or-explain reforms result in a greater increase in firm value than rule-based reforms, the effects of reforms are similar across Civil-law and Common-law countries. Further investigation suggests that the subsequent change in board independence plays an important role in explaining the effectiveness of the reforms.

Keywords: cross-country study, firm value, board reforms

JEL Classification: G15, G34, K22