Manuscript Type: Empirical Research Question/Issue: Following the 1997 Asian financial crisis South Korea introduced regulations to implement an independent director system. We investigate whether the significant changes affected firm ownership structure, in particular increases in foreign ownership of corporations. Research Findings/Insights: Using a unique dataset and panel data analyses for publicly traded Korean non-financial corporations we find that foreign investors place considerable value on the appointment of independent directors. An increase in foreign ownership, associated with an improvement in the corporate governance system, occurred after controlling home bias, firm size and firm performance. Further, the positive effect of an outside director system on foreign ownership was greater for independent firms than it was for conglomerates (chaebols) and their affiliates. Theoretical/Academic Implications: (The rest omitted)
We are grateful to Renée Adams, Mohamed Ariff, Adrian Cheung, Hyun Chul Chung, Larry Crisman, Jaehoon Hahn, Joon ho Hahn, Elaine Hutson, Hyuong-Goo Kang, Baeho Kim, Dongwon Kim, Woochan Kim, Bonyeol Koo, Oh Y. Kwon, Sangmin Lee, Seung-joo Lee, Doocheol Moon, Pascal Nguyen, Youngki Lee, Jae-un Park, Russell Smyth, participants at the 2012 Financial Markets and Corporate Governance Conference, and seminar participants at Korea University, Yonsei University, Hanyang University, KDI School and Pusan National University for their valuable comments. The usual disclaimer applies. The authors gratefully acknowledge financial support provided by Griffith University Research Grant.