The value relevance of the development of a corporate governance system

Abstract

This study first examines whether it is appropriate to integrate the 13 observed corporate governance mechanisms into the multiconstruct of information transparency, ownership structure, board structure, and firm value, and further explores whether a company’s simultaneous adoption of the multiconstruct corporate governance mechanisms positively affect its firm value. This study collected data from 262 Taiwanese firms in the information technology industry as samples for the period 2006 to 2008. Results obtained using a structural equation model analysis shows that: 1 it is fitting to use the three constructs as measurements of corporate governance and the four indicators of firm value 2 multiconstruct corporate governance indeed has significant impact on firm value. The findings conclude that companies should attempt to improve their corporate governance mechanisms and consequently benefit increased firm value.