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The King reports, independent non-executive directors and firm valuation on the Johannesburg stock exchange

The King reports, independent non-executive directors and firm valuation on the Johannesburg stock exchange
The King reports, independent non-executive directors and firm valuation on the Johannesburg stock exchange
South Africa (SA) has pursued corporate governance reforms in the form of the 1994 and 2002 King Reports. This paper examines the association between the presence of independent non-executive directors (INEDs) and market valuation of a sample of 169 firms listed on the Johannesburg Stock Exchange (JSE) in SA from 2002 to 2007. Our results suggest a statistically significant and positive relationship between the presence of INEDs and firm valuation. By contrast, we find no statistically significant association between the presence of non-executive directors (NEDs) and firm valuation. Our findings are robust across a number of econometric models that control for different types of endogeneity problems, non-linear associations and firm valuation proxies. Our findings have important policy and regulatory implications. Whereas our evidence that more independent corporate boards’ impacts positively on firm valuation provides support for the recommendations of the King Reports, it shows that to be meaningful, director independence has to be more carefully and strictly defined.
King reports, Corporate governance, Firm valuation, Independent non-executive directors, Johannesburg stock exchange, South Africa, Endogeneity
1810-3057
428-440
Ntim, Collins G.
1f344edc-8005-4e96-8972-d56c4dade46b
Ntim, Collins G.
1f344edc-8005-4e96-8972-d56c4dade46b

Ntim, Collins G. (2011) The King reports, independent non-executive directors and firm valuation on the Johannesburg stock exchange. Corporate Ownership and Control, 9 (1), 428-440.

Record type: Article

Abstract

South Africa (SA) has pursued corporate governance reforms in the form of the 1994 and 2002 King Reports. This paper examines the association between the presence of independent non-executive directors (INEDs) and market valuation of a sample of 169 firms listed on the Johannesburg Stock Exchange (JSE) in SA from 2002 to 2007. Our results suggest a statistically significant and positive relationship between the presence of INEDs and firm valuation. By contrast, we find no statistically significant association between the presence of non-executive directors (NEDs) and firm valuation. Our findings are robust across a number of econometric models that control for different types of endogeneity problems, non-linear associations and firm valuation proxies. Our findings have important policy and regulatory implications. Whereas our evidence that more independent corporate boards’ impacts positively on firm valuation provides support for the recommendations of the King Reports, it shows that to be meaningful, director independence has to be more carefully and strictly defined.

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Collins Ntim JMAA NEDs Paper 2011 - Accepted Manuscript
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More information

Published date: April 2011
Keywords: King reports, Corporate governance, Firm valuation, Independent non-executive directors, Johannesburg stock exchange, South Africa, Endogeneity
Organisations: Centre of Excellence for International Banking, Finance & Accounting, Accounting

Identifiers

Local EPrints ID: 343110
URI: http://eprints.soton.ac.uk/id/eprint/343110
ISSN: 1810-3057
PURE UUID: 7d97d13d-f2c7-4d53-9e9b-cb3f1b3814f1
ORCID for Collins G. Ntim: ORCID iD orcid.org/0000-0002-1042-4056

Catalogue record

Date deposited: 24 Sep 2012 14:10
Last modified: 30 May 2020 00:20

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