2134/15119
Amon Chizema
Amon
Chizema
Jootae Kim
Jootae
Kim
Outside directors on Korean Boards: governance and institutions
Loughborough University
2014
untagged
Business and Management not elsewhere classified
2014-07-03 15:34:41
Journal contribution
https://repository.lboro.ac.uk/articles/journal_contribution/Outside_directors_on_Korean_Boards_governance_and_institutions/9496988
Drawing on institutional theory, this study examines the factors that pressured
Korean firms to appoint outside directors to their boards. While this practice could be
considered to be a management innovation in Korea, in the Anglo-American corporate
governance system it has long been used as one of several mechanisms to mitigate agency costs
between management and shareholders. As such, this response by Korean firms, following
the 1997–98 currency crisis in Asia, could be seen as an example of corporate governance
convergence on the Anglo-American model, where higher levels of outside director
representation on the board are the norm. We examine the antecedents of having a higher
proportion of outside directors on Korean boards. Our findings indicate that larger firms that
are under stricter control by the government have higher representation of outside directors
on the board. We also find a positive and significant relationship between the proportion of
outside directors and business group affiliation, poor prior firm performance, higher levels of
debt and foreign ownership.