Do investors really value corporate governance? Evidence from the Hong Kong market

Stephen Y L CHEUNG, J. Thomas Connelly, Piman Limpaphayom, Lynda Zhou

Research output: Contribution to journalJournal articlepeer-review

106 Citations (Scopus)


To examine the relation between corporate governance and firm value, we develop an instrument to assess the corporate governance practices of listed companies in Hong Kong. Based on the Revised OECD Principles of Corporate Governance (OECD) and the Code of Best Practices (HKEx), we construct a corporate governance index (CGI) for Hong Kong listed companies. Unlike measures used in other studies, the CGI score reflects the presence of good corporate governance practices as well as variation in the quality of corporate governance practices. Empirical evidence shows that a company's market valuation is positively related to its overall CGI score, a composite measure of a firm's corporate governance practices. We also find that the transparency component of the CGI score drives the relation with market valuation. In summary, this study provides supporting evidence for the notion that, in Hong Kong, good corporate governance practices are consistent with value maximization.

Original languageEnglish
Pages (from-to)86-122
Number of pages37
JournalJournal of International Financial Management and Accounting
Issue number2
Publication statusPublished - Jun 2007

Scopus Subject Areas

  • Accounting
  • Business, Management and Accounting (miscellaneous)
  • Finance


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