Corporate Governance Tied to Stock Value

Article excerpt

Corporate governance practices of listed firms matter to stock market investors since a recent study by the Philippine Stock Exchange (PSE) showed that firm valuation is directly related to the level of corporate governance and changes in governance practices.The PSE recently released a study that examined the relationship between corporate governance (CG) practices and firm value in the Philippines.The study looked into the correlation between disclosure and corporate governance practices and firm value using a time series of corporate governance index (CGI) values for Philippine listed firms covering the period 2005-2008.The study is funded by a grant from the United Kingdom Government, as part of the project to establish a corporate governance segment in the PSE. Well-known and respected corporate governance expert, Dr. Stephen Cheung of the Hong Kong Baptist University, was commissioned to conduct the study.“The PSE is encouraged by the results that showed a positive correlation between corporate governance and firm valuation,” PSE president Francis Lim said adding that “these findings prove that investors value corporate governance practices as well as affirm the PSE’s direction of promoting good corporate governance practices in listed companies. …