earticle

영어

This study examines whether there is any difference in the stock price impact of the appointment or dismissal of outside directors for Korean firms depending on the quality of corporate governance structure. Using the event study and t-test methods, we found several interesting empirical results as follows. First, the appointment effect of outside directors on stock prices was negative just until a few days after the event date, but afterwards stock prices rebounded. The appointment of new directors has no significant effect on stock prices, but the reappointment of old directs has a significantly positive effect. Second, the announcement effect was differential depending upon the quality of corporate governance structure. So, the effect was significantly negative for Korean firms with inferior governance structure. Third, the dismissal effect of outside directors on stock prices was not significant, and the regular dismissal had no impact, either. However, the dismissal during the term of office negatively affected stock prices. In particular, firms with poorer corporate governance showed much larger drop in stock prices, possibly due to the information asymmetry problem. To conclude, Korean firms with inferior corporate governance have faced negative stock price impacts from both appointment and dismissal of outside directors. Therefore, it implies that they should take preemptive measures to improve corporate governance structure. In addition, firms with sound corporate governance should also retain independent outside directors in consecutive terms.