Does corporate governance matter? Korean banks in the postfinancial crisis era

Sungho Choi; Iftekhar Hasan; Maya Waisman

doi:10.1108/S1569-3732(2009)0000013011

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Advances in Financial Economics

ISSN: 1569-3732
Series editor(s): Professor Kose John, Professor Anil Makhija, Professor Stephen P. Ferris

Subject Area: Economics

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Does corporate governance matter? Korean banks in the postfinancial crisis era

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Title:	Does corporate governance matter? Korean banks in the postfinancial crisis era
Author(s):	Sungho Choi, Iftekhar Hasan, Maya Waisman
Volume:	13 Editor(s): Mark Hirschey, Kose John, Anil K. Makhija ISBN: 978-1-84855-536-5 eISBN: 978-1-84855-537-2
Citation:	Sungho Choi, Iftekhar Hasan, Maya Waisman (2009), Does corporate governance matter? Korean banks in the postfinancial crisis era, in Mark Hirschey, Kose John, Anil K. Makhija (ed.) Corporate Governance and Firm Performance (Advances in Financial Economics, Volume 13), Emerald Group Publishing Limited, pp.217-241
DOI:	10.1108/S1569-3732(2009)0000013011 (Permanent URL)
Publisher:	Emerald Group Publishing Limited
Article type:	Chapter Item
Abstract:	The 1997 financial crisis in Asia has entailed significant changes and governance reforms in the Korean banking industry. This study investigates the impact of corporate governance on the risk and return of Korean banks during the 10 years that followed the financial crisis era. In particular, we investigate the ownership structure of banks, the extent of involvement of foreign institutions and investors in ownership and board membership of Korean banks, and the heterogeneity of board structure on bank performance. Our findings indicate that foreign ownership, the extent of external board involvement, and the presence of foreign directors on the board are associated with significantly higher bank returns. Although foreign ownership and the number of outside board directors are associated with lower risk, the involvement of foreign board members is positively associated with risk. The results are fairly robust to a battery of tests and control variables, and offer the first detailed empirical documentation of the Korean banking governance reform and its achievements since 1997.