Corporate governance, globalization and firm productivity

We examine the relationship between globalization, corporate governance and firm productivity. The results, using longitudinal data from Korea, indicate that the positive effect of liberalising equity ownership on firms’ total factor productivity (TFP) was reinforced by indirect managerial effects when a firm improved its corporate governance. Our findings also confirm that the interaction of the managerial effect with increased foreign equity ownership is more significant than interaction with exports, suggesting that liberalising foreign investment in the host market is more effective in capitalising on the potential benefits of corporate governance reform than increasing exports to overseas markets, reflected in learning by exporting. 2013 Elsevier Inc. All rights reserved. * Corresponding author. Tel.: +617 3735 5248/+613 9905 1560. E-mail addresses: [email protected] (B.S. Min), [email protected] (R. Smyth). 1 Most of the existing literature suggests a positive association between corporate governance and accounting performance (see Morck, Wolfenzen, & Yeung, 2005; Perez-Gonzalez, 2006 for surveys). Studies of Korean firms based on this approach have produced similar results. Joh (2003) explored changes in accounting profits associated with corporate governance failure in Korean firms before the 1997 financial crisis. Black, Jang and Kim (2006) reported that the share price of a firm increased sharply with the appointment of outside directors to more than 50 percent of positions on the board. Park and Kim (2008) reported that the effectiveness of appointment of outside directors on firms’ financial performance is bound to the institutional context created by government regulation.