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Journal of Corporate Finance xxx (2016) xxx-xxx


Do mandat tata kelola perusahaan dampak jangka panjang finilairm dan tata
budaya?☆
Reena Aggarwal, Jason D. Schloetzer, Rohan Williamson⁎
Sekolah Bisnis McDonough, Universitas Georgetown, Washington, DC 20057,
Amerika Serikat
articleinfoabstract
Artikel sejarah: Diterima 21 Desember 2015 Diterima dalam bentuk revisi 9 Juni
2016 Diterima 30 Juni 2016 Tersedia online xxxx
☆ Kami berterima kasih atas diskusi yang mendalam dengan Jason Brown, Chris
Hogan, Bill Kross, Wayne Nesbit, Zoe-Vonna Palmrose, Lee Pinkowitz, Dee
Shores, René Stulz, Jason Sturgess, dan peserta pada Konferensi Perlindungan
Investor dan Tata Kelola Perusahaan di George Mason Universitas, Asosiasi
Keuangan Utara, Konferensi Keuangan Perusahaan Bristol / Lancaster /
Manchester Tahunan ke-4, dan pada seminar di Universitas Negeri Michigan,
SMU, SUNY di Buffalo, TCU, dan Universitas Washington. Para penulis
mengakui keuangandukungan dari Pusat Pasar dan Kebijakan Keuangan di
McDonough School of Business. Aggarwal mengakui dukungan dari endowmen
Robert E. McDonough.
⁎ Sesuai penulis.
Alamat email: aggarwal@georgetown.edu (R. Aggarwal), jds99@georgetown.edu
(JD Schloetzer), williarg@georgetown.edu (R. Williamson). 1 Lihat Germanova et al. (2015)
untuk perincian tentang perubahan terbaru dalam peraturan tata kelola perusahaan di Uni Eropa.

Termotivasi oleh perubahan terbaru standar tata kelola perusahaan di seluruh


dunia, kita menggunakan kejutan tory Regulasi yang secara substansial mengubah
struktur pemerintahan untuk beberapa perusahaanuntuk menjelaskan dampak
jangka panjang dari mandat yang menarik global. Perusahaan yang terkena dampak
guncangan ini memiliki nilai yang lebih rendah dan praktik tata kelola yang tidak
dimandatkan yang kurang ramah pemegang saham sebelum mandat berlaku jika
dibandingkan dengan rekan sejawat yang tidak terpengaruh. Dalam periode pasca-
mandat, kami mendokumentasikan 48% pengetatan dari kesenjangan nilai relatif,
dan menunjukkan bahwa kesenjangan ini berkaitan dengan JELklasifikasi: G3G32
G34 K22 L51
terus menggunakan praktik tata non-diamanatkan ramah kurang pemegang saham.
Hasil kami menunjukkan bahwa mandat pemerintahan dapat mengencangkan,
tetapi tidak menghilangkan, kesenjangan nilai antaraburuk dan baik perusahaan-
perusahaandiatur,dan bahwaperusahaan dipengaruhi oleh shock terus memiliki
budaya tata kelola pemegang saham ramah kurang lama setelah intervensi
peraturan.
© 2016 Elsevier BV Hak cipta dilindungi undang-undang.
Kata kunci: Tata kelola perusahaan Nilai perusahaan Budaya perusahaan Peraturan
internasional
1. Pendahuluan
Regulator di seluruh dunia terus membuat peraturan yang menargetkan
“kekurangan tata kelola perusahaan perusahaan terbuka” (UK Corporate
Governance Code [2014]). Contoh terbaru dari upaya tersebut termasuk revisi
usulan Direktif Hak Pemegang Saham untuk menanamkan praktik tata kelola yang
mempromosikan "kepentingan jangka panjang perusahaan" (Germanova, Pierce,
Richez-Baum, dan Armstrong 2015).1 Demikian pula, pada bulan Juni 2015, Bursa
Efek Tokyo menerapkan reformasi yang melibatkan 73 atribut tata kelola dengan
maksud untuk “meningkatkan nilai perusahaan dalam jangka menengah hingga
jangka panjang.”Intervensi di Inggris, Eropa dan Jepang konsisten dengan gerakan
global lebih dari satu dekade panjang untuk memintaperusahaan-perusahaanuntuk
menerapkan praktik pemerintahan yang diyakini mendorong nilai jangka panjang
dan meningkatkan fibudaya tata kelolarms' secara keseluruhan. Dalam makalah ini
kami mengadopsi perspektif jangka panjang dari regulator untuk memeriksa
http://dx.doi.org/10.1016/j.jcorpfin.2016.06.007 0929-1199 / © 2016 Elsevier BV
All rights reserved.
Daftar isi tersedia di ScienceDirect
Journal ofCorporate
homepage jurnalFinance: www.elsevier.com/locate/jcorpfin
Silakan mengutip artikel ini sebagai:. Aggarwal, R., et al, Apakah mandat tata
kelola perusahaan jangka panjang dampak finilairm dan budaya tata kelola ?, J.
Corp. Finance (2016), http://dx.doi.org/10.1016/j.jcorpfin.2016.06.007
2 R. Aggarwal et al. / Journal of Corporate Finance xxx (2016) xxx-
xxx

dampak mandat tata kelola pada nilai jangka panjang, dan untuk menilai bagaimana dewan
yang paling terpengaruh oleh mandat mengubah praktikpraktik pemerintahan non-mandat
mereka--yaitu, bagaimana dewan mengubah tata kelola keseluruhan mereka budaya.
Kami memeriksa implikasi jangka panjang dari intervensi regulasi menggunakan
mandat tata kelola yang memiliki cakupan global. Sebagai pengadopsi awal reformasi tata
pemerintahan, Amerika Serikat memberikan latar belakang yang bermanfaat untuk
mempelajari bagaimana mandat memengaruhi nilai jangka panjang dan budaya tata kelola.
Pada tahun 2003, hampir 30% dariindustriAS firmsdiminta untuk secara substansial praktek
perubahan ruang rapat untuk mematuhi kriteria pemerintahan baru termasuk dalam standar dan
NYSE NASDAQ revisi daftar. Mirip dengan maksud perubahan terbaru dalam persyaratan tata
pemerintahan di seluruh dunia, sesuai dengan ketentuan itu dimaksudkan untuk memiliki
luasramifikationpada kualitas pengawasan dewan di antara perusahaan-perusahaanyang tidak
sudah memiliki praktik papan disukai. Sementara studi di negara berhubungan langkah-
langkah pemerintahan untuk nilai pemegang saham, masih belum jelas apakah
perubahanpaksa;spesifikatribut pemerintahan memiliki positif, negatif, atau efek bersih sedikit
pada langkah-langkah jangka pendek dari nilai (lihat Dahya dan McConnell, 2007
Chhaochharia dan Grinstein, 2007; Larcker et al., 2011 untuk kontras seperti itu). Selain itu,
implikasi untuk nilai jangka panjang tetap belum diselidiki, dan ada sedikit bukti tentang
bagaimana direksi menanggapi perubahan tata kelola paksa dengan mengubah aspek tata
kelola yang tidak dimandatkan. Dengan demikian, apakah pandangan peraturan tentang
mandat memiliki implikasi untuk nilai jangka panjang dan perubahan dalam tata kelola yang
tidak dimandatkan tetap menjadi pertanyaan empiris terbuka. Bukti ini penting bagi regulator
di seluruh dunia karena mereka bergulat dengan kritik bahwa reformasi pemerintahan
mengurangi nilai jangka pendek dan, karenanya, harus dipertimbangkan kembali (lihat,
misalnya, Takeo, 2015).
Dalam semangat dan Hermalin Weisbach (1998) Model tawar komposisi papan, kita
asumsikan potensi bersihbagimanfaat pemegang berbagi-kriteria baru dan NYSE NASDAQ
governance harus memanifestasikan dirinya dalam perusahaan-perusahaandengan praktik tata
ada yang di- konsisten dengan mandat tata kelola baru (yaitu, "terkena dampak
yangperusahaan"). Perhatikan bahwa kerangka konseptual hal ini mengasumsikan praktek tata
kelola yang diamati adalah “optimal” untuk perusahaan-perusahaansebelum perubahan paksa
di pemerintahan, dan bahwa mandat membatasi perusahaan-perusahaankemampuan untuk
memilih praktik yang mereka sukai. Konsisten dengan pandangan ini, jika perusahaan-
perusahaandalam periode pra-mandat memilih “optimal” struktur tata kelola bagi pemegang
saham, kami berharap tidak ada perbedaan antara nilai-nilai jangka panjang terpengaruh dan
tidak terpengaruhcocok perusahaan-perusahaandalam periode ini, ceterisparibus.Selain itu,
kita mungkin find penurunan relatif dalamterkena finilai rmsebagai reformasi akan
memaksayang terkena dampak perusahaan-perusahaanuntuk beralih dari praktek-praktek yang
mereka sukai. Di sisi lain, mandat dapat menguntungkanfipemegang sahamt jika ada
eksternalitas positif dengan tata kelola bahwaperusahaan tidak memperhitungkan ketika
merancang struktur pemerintahan mereka sendiri (lihat Acharya dan Volpin, 2010; Dicks 2012
untuk argumen terkait). Perspektif ini menunjukkan mandat mengubah biaya
danbenefitsmengadopsi praktek tata kelola tertentu, sehingga menyenggolyang terkena
dampak perusahaan-perusahaanterhadap struktur pemerintahan yang menguntungkan terkait
dengan nilai jangka panjang. Dengan demikian, kita bisamenemukan peningkatan relatif
terkena finilairm dalam periode pasca-mandat, ceterisparibus.Apakah atau tidak mandat
pemerintahan mempengaruhi jangka panjang nilai, praktik tata kelolayang terkena perusahaan-
perusahaanbisa berevolusi secara berbeda dalam periode pasca-mandat sebagai papan
merancang sebuahbaru. “optimal” budaya pemerintahan
Kami -pertamatama memeriksa dampak nilai jangka panjang dari mandat tata kelola
padaterkena dampak yangperusahaansebagai bagian dari analisis kami yang lebih luas tentang
hubungan antara mandat, nilai jangka panjang dan budaya tata kelola. Hasil nilai jangka
panjang kami memberikan beberapa wawasan. Pertama, finilairm lebih rendah pada periode
pra-mandat untukyang terkena dampak perusahaan-perusahaanrelatif terhadap kecenderungan-
skor cocok control perusahaan-perusahaan.Kami juga mendapatipeningkatan relatif nilai
bagiyang terkena dampak perusahaan-perusahaandalam periode pasca-mandat. Peningkatan
relatif ekonomis penting,mencerminkan48% pengetatan dari “nilaikesenjangan” antarayang
terkena dampak perusahaan-perusahaandan rekan-rekan tidak terpengaruh mereka.
Peningkatan relatif ini berlanjut dan tidak terbalik dalam periode sampel kami. Analisis ini
memberikan ukuran yang jelas tentang kepentingan ekonomi dari peningkatan relatif
dalamterkena dampak yangnilai perusahaansetelah adopsi mandat tata kelola. Analisis juga
menunjukkan bahwa kesenjangan nilai tetap bertahan lama setelah intervensi regulasi.
Kami selanjutnya menyelidiki saluran potensial di mana kesenjangan nilai dapat
bertahan. Regulator tidak dapatmemengaruhibanyak aspek tata kelola perusahaan secara
langsung dan, dengan demikian, bergantung pada regulasi memiliki efek spillover pada aspek
non-mandat pemerintahan.2 Masih belum jelas apakah perusahaan-perusahaanyang paling
terpengaruh oleh pemerintahan mandat juga berbeda dalam budaya pemerintahan secara
keseluruhan mereka-yaitu, berbeda dalam praktik pemerintahan non-mandat mereka. Kami
memeriksa kemungkinan ini dengan menganalisis bagaimanaterkena dampak
yangperusahaanmengubah pemerintahan mereka yang tidak diamanatkan dari waktu ke waktu,
dan membandingkan perubahan mereka dengankontrol yang cocok -perusahaanperusahaan
dari perusahaan. Kami label perbedaan sebagai “kesenjanganbudayapemerintahan,” dan
memeriksa apakah kesenjangan ini berkaitan dengan fikesenjangannilai rm. Jika ada hubungan
antara kesenjangan tata kelola dan kesenjangan nilai, maka kami menyimpulkan bahwa
perbedaan dalam tata kelola yang tidak dimandatkan adalah saluran yang melaluinya
kesenjangan nilai dapat bertahan.
Kami menguji gagasan ini menggunakan 31 praktik tata kelola yang tidak
dimandatkan yang melampaui yang termasuk dalam kriteria pencatatan bursa baru. Kami
mendapatibahwa kesenjangan budaya pemerintahan memang ada, dan ini terkait dengan
kesenjangan nilai yang terus-menerus.terpengaruhterkena dampak yangyangTata kelola
perusahaanmandat perusahaan-khususnya praktik tingkat dewan yang ramah terhadap
pemegang saham-paling kuat terkait dengan nilai jangka panjang; praktek re- lated dengan
ketentuan pengambilalihan dan kompensasi tidaksignifikan.Kami kemudian mengeksplorasi
perbedaan dalamspesifikpraktik ruang rapat untuk memberikan wawasan lebih dalam
kesenjangan pemerintahan antarayang terkena dampak perusahaan-perusahaandan rekan-rekan
tidak terpengaruh mereka. Bukti menunjukkan bahwa praktik tingkat dewan yang kurang
ramah pemegang saham mengenai transaksi pihak terkait dan nominasi direktur sangat terkait
dengan kesenjangan tata kelola. Secara keseluruhan, hasil menunjukkan mandat tata kelola
perusahaan dapat mengencangkan, tetapi tidak menghilangkan, fiperbedaannilairm buruk dan
baik antarperusahaandiatur.Perbedaan yang sedang berlangsung dalam budaya tata kelola
berkontribusi pada kesenjangan nilai persisten.
Desain penelitian kami membantu endogeneity kekhawatiran Mengurangi dengan
menggabungkan kejutan quasi-eksogen (kriteria daftar revisi bursa) denganpengidentifikasian
perusahaan-perusahaanberbeda-beda dipengaruhi oleh revisi. Kami menambah pendekatan ini
dengan menggunakan algoritma pencocokan yang bergantung pada regresi bertahap
dikombinasikan dengan istilah tingkat tinggi dan interaksi antara kovariat untuk meningkatkan
tumpang tindih kovariat.3 Kami kemudian membangun sampel perusahaan-perusahaandengan
praktik tata ada yang tidak memenuhi kriteria daftar, dan cocok kontrol perusahaan-
perusahaan.Pendekatan kami berbeda dari studi yang studi penggunaan peristiwa atauasing
firm pencocokan metodologi untuk menilai net

2 Misalnya, Komisi Eropa menyoroti sembilan papan-tingkat, pengambilalihan, dan tantangan kompensasi yang papan harus mengatasi sendiri,
termasuk bagaimanamengelola terkait transaksi -party dan nominasi / penunjukan direktur (lihat
Bagian 2.3 laporan Komisi Eropa 2014).
3 Algoritma ini didasarkan pada algoritma pencocokan skor kecenderungan berbasis data yang dibahas dalam Imbens (2014) dan Imbens dan Rubin
(akan datang). Kami membahasini algoritmadi Bagian 3.

Silakan mengutip artikel ini sebagai:. Aggarwal, R., et al, Do mandat tata kelola perusahaan
dampak jangka fipanjang-nilairm dan budaya tata kelola ?, J. Corp Keuangan (2016),
http://dx.doi.org/ 10.1016 / j.jcorpfin.2016.06.007
3 R. Aggarwal et al. / Jurnal Keuangan Perusahaan xxx (2016) xxx-
xxx

fiefeknilai rm regulasi. Studi tersebut memberikan bukti penting tentang hubungan antara
regulasi dan berbagai fihasilrm tetapi kurang mampu memperkirakan implikasi jangka panjang
dari mandat pemerintahan sendiri (lihat Leuz 2007 untuk diskusi terkait). Pendekatan kami
juga menanggapi kritik baru-baru ini bahwa studi “tidakmenggunakan penelitian desain
jugadiadaptasi” untuk menyelidiki implikasi nilai bersihspesifikperubahan
peraturan(Coatesdan Srinivasan,2014).
Studi ini memberikan beberapa kontribusi pada yang ada.umum kami Finding bahwa
perubahan memaksa dalam praktek ruang rapat diamanatkan oleh bursa saham utama AS
berhubungan positif dengan nilai jangka panjang dari perusahaan-perusahaanyang paling
terpengaruh oleh mandat memberikan kontribusi untuk pemahaman kita tentang hubungan
antara pemerintahan dan nilai.4 Kamisecarakhusus berkontribusi untuk studi yang menilai
hubungan ini menggunakan guncangan quasi-eksogen dengan pemerintahan, yang merupakan
daerah berkembang sastra yang telah menghasilkan hasil campuran. Studi kontras bukti yang
menguntungkan kami bahwa find sebuah hubungan yang tidak menguntungkan antara return
jangka pendek saham dan reformasi mengusulkan bahwa target papan terhuyung-huyung, CEO
ketua dualitas, dan akses proxy(Larckeret al.,2011),dan mendukung penelitian yang
mendapatiperbaikan di kinerja operasi jangka pendek setelah perubahan paksa ke dewan
independensi (Dahya dan McConnell, 2007; Chhaochharia dan Grinstein, 2007). Dengan
mengadopsi pandangan regulator jangka panjang, kami memberikan bukti baru bahwa mandat
dapat menguntungkanpengaruhnilai jangka panjang.
Kami juga memberikan wawasan tentang evolusi tata kelola dalam
-perusahaanperusahaan yang menjadi target regulasi tata kelola. Studi umumnya berfokus pada
hasil yang berkaitan dengan pemantauan dewan, termasuk perubahan struktur kompensasi dan
pasar keseluruhan untuk direksi (lihat, misalnya, Narayanan dan Seyhun, 2006; Dicks, 2012;
Guthrie et al., 2012; Linck et al. , 2009; Guo dan Masulis, 2014). Kurang banyak diketahui
tentang evolusi praktek ruang rapat setelah regulasi, dan tidak ada studi untuk pengetahuan
kita menghubungkan perubahan tersebut dengan perusahaan.nilai Kami mendapatibahwa
perusahaan-perusahaanyang paling terpengaruh oleh mandat pemerintahan terus memiliki
pemegang budaya tata kelola ramah kurang berbagi-yang, pada gilirannya, berhubungan
dengan persisten. fikesenjangannilai rm Kami menunjukkan bahwa praktik tata kelola tingkat
dewan yang kurang ramah pemegang saham, dan bukan praktik pengambilalihan dan
kompensasi, sebagian besar terkait dengan kesenjangan nilai yang sedang berlangsung. Oleh
karena itu, kami memberikan penerangan baru tentang bagaimana fibudaya tata kelolarms'
pada saat perubahan paksa di pemerintahan mempengaruhi praktek ruang rapat lama setelah
mandat yang berlaku. Analisis ini memiliki implikasi yang jelas bagi regulator yang berupaya
meningkatkan tata kelola perusahaan di seluruh dunia.
Akhirnya, ketika regulator terus mempertimbangkan intervensi regulasi yang didorong
oleh tata kelola, makalah ini menyoroti kemungkinan keberhasilannya. Pengambilan kunci dari
bukti kami adalah bahwa ketentuan tata kelola yang diamanatkan dapat memiliki efek
limpahan pada aspek tata kelola di luar yang diamanatkan. Namun, banyak dari praktik ramah
pemegang saham yang kurang yang merupakan bagian dariterkena dampak yangbudaya tata
kelola perusahaanbertahan selama setidaknya beberapa tahun setelah intervensi peraturan.
Tampaknya faktor hadir dalamyang terkena dampak perusahaan-perusahaanpada mandat
waktu ditegakkan memiliki efek berlama-lama di finilai rmdan tata kelola, yang memberikan
wawasan penting ke dalam potensi keberhasilan upaya global untuk meningkatkan budaya tata
kelola secara keseluruhan dengan menerapkan mandat pemerintahan baru.
Makalah ini disusun sebagai berikut. Bagian 2 menjelaskan metode pemilihan sampel
dan variabeldedefinisifi. Bagian 3 dan 4 memberikantata finilairm dan budaya kelola hasil,
masing-masing. Bagian 5 menyajikan uji ketahanan kami, dan Bagian 6 menyimpulkan.

2. Data dan metodologi

Tujuan analisis kami adalah untuk mengadopsi perspektif jangka panjang dari regulator
untuk memeriksa dampak mandat tata kelola pada nilai jangka panjang, dan untuk
mengeksplorasi bagaimana dewan yang paling terpengaruh oleh mandat mengubah budaya tata
kelola mereka secara keseluruhan. Kami menggunakan Amerika Serikat sebagai pengaturan
penelitian kami, dan mengukur apakah ketentuan tata kelola perusahaan yang termasuk dalam
NYSE dan NASDAQ kriteria daftar direvisi berhubungan dengan jangka panjang finilai rm
dan budaya pemerintahan.
fiAnalisisnilai rm berfokus pada periode 1998-2007 untukmencerminkanperiode
sebelum dan sesudah mandat; kita mengecualikan tahun 2008 dan seterusnya karena
dimemengaruhidari keuangankrisis finilairmdan berlalunya regulasi pemerintahan berikutnya
(misalnya, The Dodd-Frank Wall Street Reformasi dan Perlindungan Konsumen UU). Kami
mendapatkan fiatribut pemerintahan rm-level untuk periode 2001-2008; tahun 2001 adalah
tahun paling awal di mana serangkaian praktik yang konsisten dapat diukur sepanjang waktu
menggunakan data RiskMetrics, dan kami mengecualikan tahun setelah 2008 karena
perubahan dalam prosedur pengukuran tata kelola (dibahas di bawah).
Analisis kami menganggap perusahaan-perusahaandi salah satu indeks berikut:
Standard dan Poor 500, Standard dan Poor Small Cap 600, dan Russell 3000. Kami fokus
padaindustri perusahaan-perusahaandan belum termasuk emiten asing dan perusahaan-
perusahaandi mana N50% dari hak suara untuk pemilihan direksi dipegang oleh individu,
kelompok, ataulain firmakarena persyaratan listing bagiini perusahaan-perusahaanberbeda dari
emiten lainnya. Selain itu, perusahaan-perusahaanyang kami tidak dapat memperoleh yang
diperlukan informasikeuangandari data Compustat Industri Tahunan dieliminasi. Prosedur ini
menghasilkan sampel 1982 perusahaan-perusahaandi seluruh 15 industri dengan data
governance yang tersedia pada tahun 2001.

2.1. Pemerintahan tingkat


perusahaan

Kami memperoleh fiatributpemerintahan rm-tingkat dari RiskMetrics,


yangidentifikasies praktik tata dengan memeriksaperaturan fi,lings laporan tahunan, dan
website perusahaan.5 Kami mengumpulkan informasi tentang41fipraktik rm-tingkat global
governanceyang umum di seluruhAS perusahaandan diukur secara konsisten di seluruh
periode sampel (lihat Lampiran A untuk rincian). Praktik tata kelola ini bersifat global, dan
telah dipelajari oleh Aggarwal et al. (2009) dan Aggarwal et al. (2011) di 23 negara. Atribut-
atribut ini mencakup empat sub-luas

4 Lihat, misalnya, Morck et al. (1988), Gompers et al. (2003), Fich dan Shivdasani (2006), Larcker et al. (2007), Bebchuk et al. (2009), Duchin et al.
(2010), Evans et al. (2010), dan Faleye et al. (2011).

5 Mandat tata kelola kami yang terkait dengan data dan bursa tidak memiliki pemetaan satu-ke-satu yang sempurna. Sebagai contoh,
RiskMetricsdefinisidari direkturindepen- denceyang ketat dibandingkan dengandefinisiyang digunakan oleh

bursa. Sejauh mana perubahan dalam pemerintahan untuk mematuhi mandat


tidaktercermindalam data RiskMetrics karena aturan yang lebih ketat akan bias terhadap
finding hasil.
Silakan mengutip artikel ini sebagai:. Aggarwal, R., et al, Do mandat tata kelola perusahaan
dampak jangka fipanjang-nilairm dan budaya tata kelola ?, J. Corp Keuangan (2016),
http://dx.doi.org/ 10.1016 / j.jcorpfin.2016.06.007
4 R. Aggarwal et al. / Jurnal Keuangan Perusahaan xxx (2016) xxx-
xxx

kategori: (1) Dewan (24 praktik), (2) Audit (tiga praktik), (3) Ketentuan anti pengambilalihan
(enam praktik), dan (4) Kompensasi dan Kepemilikan (delapan praktik). Dewan menangkap
aspek-aspek dewan direksi seperti independensi, komposisi komite, ukuran, transparansi, dan
bagaimana dewan melakukan tugasnya. Audit mencakup pertanyaan tentang independensi
komite audit dan peran auditor. Ketentuan anti-pengambilalihan diambil dari fipiagamrm dan
oleh-hukum dan mengacu pada struktur dual-class,spesifikhak pemegang saham, dan kontrol
mengenai adopsi pil racun dan cek disukai emisi saham kosong. Kompensasi dan Kepemilikan
berkaitan dengan kompensasi eksekutif dan direktur pada masalah yang terkait dengan opsi,
kepemilikan saham, dan bagaimana kompensasi ditetapkan dan dipantau.
Kami menggunakan 41 praktik untuk membuat ukuran ringkasan,GOV41, untuk setiap
perusahaan.GOV41 memberikan nilai satu untuk masing-masing praktik tata 41 jikaperusahaan
memenuhi panduan diterima minimal pada atribut itu, dan nol sebaliknya. Kami menyatakan
ukuran kami sebagai persentase; jika suatuperusahaanterpenuhies ke-41 atribut, maka GOV41
akan sama 100%. Kami menggunakan 41 atribut ini untuk mengisolasi set sepuluh praktik tata
kelola yang paling terkait dengan mandat tata kelola yang termasuk dalam standar NYSE dan
NASDAQ yang direvisi. Kami kemudianmendefinisikanREG10 menjadi jumlah praktik tata
mengamanatkan firm dimiliki pada tahun 2001. praktik tata sepuluh yang paling dekat
berhubungan dengan kriteria pemerintahan bursa baru6:

1. Dewan harus terdiri dari mayoritas direktur independen . 2. Direktur


non-manajemen harus memiliki sesi eksekutif tanpa manajemen. 3.
Komite Nominasi harus terdiri dari hanya direktur independen. 4.
Komite Kompensasi harus terdiri dari hanya direktur independen. 5.
Komite Audit harus terdiri dari hanya direktur independen dan
setidaknya tiga anggota. 6. Persetujuan pemegang saham atas rencana
kompensasi ekuitas. 7. Perusahaan harus mengadopsi dan
mengungkapkan pedoman tata kelola perusahaan. 8. Penilaian rutin atas
kinerja Dewan. 9. Ada rencana suksesi CEO yang disetujui oleh dewan.
10. Biaya konsultasi yang dibayarkan kepada auditor kurang dari biaya
audit yang dibayarkan kepada auditor.7

Kami menggunakan 31 praktik tata kelola yang tersisa untuk mengukur budaya tata
kelola.Secarakhusus, kita menghapus pemerintahan sepuluh atribut yang terlibat dalam bursa
revisi daftar standar dari GOV41 dan memeriksa evolusi aspek non-mandat pemerintahan.
Kami mengungkapkan ukuran ini, GOV31,sebagai persentase sehingga jika
suatuperusahaanterpenuhies ke-31 praktik tata kemudian GOV31 akan sama dengan 100%.
Kami juga menghapus sepuluh praktik yang diamanatkan dari subkategori yang relevan:
Dewan (17 praktik yang tersisa), Anti-pengambilalihan (enam praktik), danKompensasi (tujuh
praktik). Perhatikan bahwa Audit subkategoridihilangkan setelah menghapus praktik-praktik
yang diamanatkan oleh standar pencatatan bursa yang direvisi. Dengan demikian, Audit
dihapus dari analisis. Ukuran budaya tata kelola kami memungkinkan kami untuk menyelidiki
apakah dan bagaimana aspek tata kelola yang tidak dimandatkan berevolusi melintasi waktu
dalam periode pasca-mandat. Ukuran ini juga memungkinkan kita untuk menguji sejauh mana
perbedaan budaya pemerintahan antara perusahaan-perusahaanberbeda-beda dipengaruhi oleh
mandat menjelaskan variasi finilairmdalam periode pasca-mandat.

2.2.Identifikasidariyang terkena
dampak perusahaan-
perusahaan

Seperti telah dibahas sebelumnya, kita mengidentifikasi perusahaan-perusahaanyang


diperlukan untuk secara substansial memodifikasi praktek tata kelola mereka untuk mematuhi
Standar pencatatan revisi; kita sebut ini sebagai TERDAMPAK. perusahaan-
perusahaanKamimendefinisikan TERKENA perusahaan-perusahaansebagai orang-orang yang
bertemu tiga atau lebih sedikit dari mandat REG10 pada tahun 2001. Kami pilih cut-off dari
tiga karena merupakan salah satu mandat kurang dari nilai median REG10 empat mandat dan
kami tertarik dalam mengidentifikasi mereka Perusahaanyang paling terpengaruh oleh mandat.
Kami kemudianmendefinisikantersisa firms(SISA)sebagai orang-orang yang memenuhi lebih
dari tiga mandat pada tahun 2001.
Kami pertamamenetapkan bahwa kami TERKENA klasifikasiidentifikasies firms
dengan budaya pemerintahan yang berbeda. Tabel1,Panel A melaporkan mean GOV41
skoruntuk TERKENA dan TERSISA perusahaan-perusahaandari tahun 2002 sampai 2008.
pemerintahan Firm-level berkembang cukup dari waktu ke waktu untukyang terkena
perusahaan-perusahaandampak.Misalnya, skor governance berarti bagi TERKENA perusahaan-
perusahaanmeningkat dari 0,388 di 2002-0,660 pada tahun 2008; yaitu,terkena dampak
yangperusahaanmemenuhi 38,8% (66,0%) dari 41 praktik tata kelola pada tahun 2002 (2008).
Demikian pula, nilai rata-rata untuk TERSISA perusahaan-perusahaanmenunjukkan
bahwaperusahaan memenuhi 47,9% (69,3%) dari 41 praktek pada tahun 2002 (2008).
Perbedaan-in-cara t-tests antara TERKENA danTERSISA firms menunjukkan bahwa meskipun
peningkatan GOV41 untuk setiap kelompok dan “kesenjanganpemerintahan”
menyempit,TERKENA perusahaan-perusahaanterus memiliki skor pemerintahan statistik lebih
rendah.
Kami lebih mengeksplorasi evolusi fipemerintahan rm-level untukyang perusahaan-
perusahaanterkenamemeriksa apakah tingkat berbeda evolusi dengan fiukuranrm, diukur
dengan total aset, dan fiusiarm (untabulated). Pada tahun 2008, terbesaryangterkena
perusahaan-perusahaan GOV41 skordari 0,617, meningkat 75% dari 2002 skor 0,407. Sebagai
perbandingan, terkecilyang terkena dampak perusahaan-perusahaanmemiliki GOV41 skordari
0,617, meningkat 65% dari 2002 skor 0,375. Bukti univariat ini menunjukkan bahwayang
lebih besar perusahaanberevolusi agak lebih cepat

6 Standar pencatatan NYSE menunjukkan bahwa ketidakpatuhan dengan mandat tata kelola perusahaan dapat mengakibatkan suspensi dan delisting
dari sahamperusahaan dansurat utang tertentu; untuk detail tambahan, lihat:
http://nysemanual.nyse.com/LCMTools/PlatformViewer.asp?
selectednode=chp_1_4_3_3&manual=% 2Flcm% 2Fsection% 2Flcm-bagian% 2F. NASDAQ
mengungkapkan daftar perusahaan-perusahaanyang patuh dengan standar yang listing,
termasuk perusahaan-perusahaanyang patuh dengan mandat tata kelola perusahaan. Untuk
NASADQ, lihat: https://listingcenter.nasdaq.com/assets/continuedguide.pdf. Untuk
singkatnya, kami menggunakan RiskMetricsdefinisiuntuk mengidentifikasi setiap latihan.
7 definisidan pengobatan non-audit (yaitu, jasa konsultasi) yang disediakan oleh auditor luar telah berubah dari waktu ke waktu berdasarkan
perubahan Securities and Exchange Commission (SEC) dan Perusahaan Publik Akuntansi Dewan

Pengawas (PCAOB) aturan dan peraturan . Hasil kami kuat untuk tidak termasuk mandat
pemerintahan ini daripengidentifikasianyang terkena perusahaan-perusahaandampak.

Silakan mengutip artikel ini sebagai:. Aggarwal, R., et al, Do mandat tata kelola perusahaan
dampak jangka fipanjang-nilairm dan budaya tata kelola ?, J. Corp Keuangan (2016),
http://dx.doi.org/ 10.1016 / j.jcorpfin.2016.06.007
5 R. Aggarwal et al. / Jurnal Keuangan Perusahaan xxx (2016) xxx-xxx
Tabel 1 Skor indeks tata kelola perusahaan.
(1) TERKENA Tahun
(N = 621)
Silakan mengutip artikel ini sebagai:. Aggarwal, R., et al, Apakah perusahaan
mandat pemerintahan dampak jangka panjang finilairm dan budaya tata kelola ?, J.
Corp Keuangan (2016), http://dx.doi.org/10.1016/j.jcorpfin.2016.06.007
(2) SISA (N = 1.361)
(3) Perbedaan (1 vs 2)
(4) t-statistik (1 vs 2)
Panel A: skor Berarti GOV41 2002 0,388 0,479 - 0,091-21,89*** 2003 0,462
0,530-0,068 -12,36 *** 2004 0,543 0,599-0,056 -10.31 *** 2005 0,597 0,639-
0,042 -7.91 *** 2006 0,624 0,659 -0,035 -6,48 *** 2007 0,642 0,673 -0,031 -5,38
*** 2008 0,660 0,693 -0,033 -5,59 ***
Panel B: Skor GOV31 rata-rata0,440 20020,469 -0,029 -5,90 *** 2003 0,468
0,502 -0,034 -6.05 *** 2004 0.502 0.539 -0.037 -6.65 *** 2005 0.550 0.574 -0.024
-4.29 *** 2006 0.568 0.588 -0.020 -3.30 *** 2007 0.583 0.605 -0.022 -3.64 ***
2008 0.602 0.624 -0.022 -3.42 ***
Nama industri
(1) GOV41
(2) GOV31
Panel C: Nilai rata-rata GOV41 dan GOV31 oleh dalam Pandanus conoideus
Lamk Pertanian, kehutanan, perikanandan berburu 0,572 0,527 Mining,
penggalian, dan ekstraksi minyak dan gas 0,590 0,541 Konstruksi 0,609 0,555
Manufacturing 0,592 0,548 Grosir perdagangan 0,571 0,540 dagang eceran 0,589
0,556 Transportasi dan pergudangan 0,580 0,543 Informasi 0,561 0,526
Professional,ilmiah,dan layanan teknis 0,578 0,538 Layanan administrasi dan
dukungan, pengelolaan limbah, dan remediasi 0,579 0,535 Layanan pendidikan
0,584 0,531 Bantuan kesehatan dan sosial 0,595 0,554 Seni, hiburan, dan rekreasi
0,525 0,517 Akomodasi dan layanan makanan 0,577 0,534 Layanan lainnya 0,559
0,506 Layanan lainnya 0,559 0,506
Tabel ini melaporkan perusahaan skor pemerintahan untukterkena
firms(tERKENA)danyang tersisa perusahaan-perusahaandalam
sampel(sISA)menggunakan indeks pemerintahan didasarkan pada penjumlahan
yang sama-berat praktek tata kelola. Perusahaan
-yangperusahaanTERPENGARUH memenuhi tahun 2001 dengan tiga atau kurang
dari sepuluh mandat tata kelola yang direvisi dalam standar pencatatan NYSE dan
NASDAQ.Perusahaan-yangperusahaantersisa memenuhi pada tahun 2001 dengan
lebih dari tiga dari sepuluh mandat. Panel A melaporkan skor untuk 41 atribut tata
kelola secara konsisten dilacak oleh RiskMetrics. Panel B melaporkan skor untuk
31 atribut tata kelola yang tidak diamanatkan oleh standar pencatatan yang direvisi
dan secara konsisten dilacak oleh RiskMetrics. Panel C melaporkan skor corporate
governance dimaksud dengan NAICS industri 2 digitklasifikasiuntuk sampel
penuh(2002-2008).T-statistik menilai perbedaan antara TERKENA dan SISA
perusahaan-perusahaan.***p b 0,01, **p b 0,05, *p b tes0,10, dua ekor dari
statistiksignifikansi.
dariyang lebih perusahaan-perusahaankecil,rata-rata. Sehubungan dengan evolusi
tata fiusiarm,yang lebih tua perusahaan-perusahaanmuda) (firms memiliki GOV41
skordari 0.660 (0,662) pada tahun 2008, menunjukkan peningkatan 70% (71%)
dari 2002 skor 0,388 untuk setiap usia kelompok. Bukti univariat ini menunjukkan
bahwa perusahaan yang lebih tua dan lebih muda rata -ratatidak berevolusi satu
sama lain.
Tabel1,Panel B melaporkan mean GOV31 skoruntuk TERKENA dan TERSISA
perusahaan-perusahaan2002-2008, yang mewakili ukuran kami budaya
pemerintahan. Perusahaan-tingkat, non-mandat pemerintahan berevolusi dari
waktu ke waktu untukyang perusahaan-perusahaanterkena,namun kesenjangan
pemerintahan antaratersebut perusahaan-perusahaandan sisanya firms tetap
berlangsung. Misalnya,terkena dampak yangperusahaanmemiliki 44,0% (60,2%)
dari praktik tata kelola yang tidak dimandatkan yang mencakup ukuran budaya tata
kelola kami pada tahun 2002 (2008); t-tests antara TERKENA dan TERSISA
perusahaan-perusahaanmenunjukkan TERKENA bahwaperusahaanterus memiliki
skor pemerintahan statistik lebih rendah.
Tabel 1, Panel C melaporkanrata-rata skorGOV41 dan GOV31 oleh industri 2 digit
NAICS untuk sampel. Pemerintahan tingkat perusahaan untuk kedua skor
corporate governance bervariasi di seluruh industri, dengan perusahaan-
perusahaandi Perdagangan Ritel (Jasa Lainnya) industri memiliki tertinggi ukuran
(terendah) budaya tata kelola (seperti yang terlihat dengan GOV31 skordari 0,556
dan 0,506 pada kolom 2, masing-masing).
2.3. Karakteristik perusahaan
Kami selanjutnya membandingkan fikarakteristikrm dari TERKENA dan TERSISA
perusahaan-perusahaanyang mungkin terkait dengan finilairm, proksiTobin,qdan
budaya pemerintahan. Kami membandingkan TERKENA dan TERSISA
perusahaan-perusahaandi seluruh firm-spesifikkarakteristik diketahui berhubungan
dengan Tobin q: UKURAN (log dari total aset), KAS (rasio total kas dan setara kas
terhadap total aset tertinggal), CAPEX (rasio modal pengeluaran untuk total aset
yang tertinggal), LEVERAGE ((utang jangka panjang + utang dalam kewajiban
lancar) / (utang jangka panjang + utang dalam kewajiban lancar + pemegang
saham
6 R. Aggarwal et al. / Jurnal Corporate Finance xxx (2016) xxx-xxx

equity)), SGROWTH (pertumbuhan total pendapatan), YIELD (rasio total dividen dengan nilai
pasar ekuitas),PPE (rasio properti, pabrik, dan peralatan terhadap total pendapatan), dan ROA
(rasio pendapatan sebelum barang luar biasa untuk nilai buku total aset). Untuk memberikan
wawasan tambahan, kami juga melaporkan ASET (nilai buku dari total aset, dalam jutaan),
MKTCAP (nilai pasar ekuitas, dalam jutaan), PENDAPATAN (total pendapatan, dalam jutaan),
danAGE(jumlah tahunfirm memiliki menjadi perusahaan publik). It is important to note that
several of these variables relate to governance; for instance, larger firms tend to be better
governed.
Table 2, Panel A presents descriptive statistics for the full sample. Column 1 reports
that sample firms have $2.275 billion in book value of total assets and $2644 billion in total
revenue, on average. Such firms generate return on assets of 10.8% and have annual sales
growth of approximately 16.2%, on average. Column 2 reports the medians and not
surprisingly there is skewness in firm size. We now see how firms compare across those that
were more affected by mandates relative to the remaining firms.
Table 2, Panel B reports mean values for these firm-specific characteristics for the
sample of AFFECTED and REMAINING firms. Columns 1 and 2 show that AFFECTED and
REMAINING firms are significantly different along most of the firm characteristics prior
literature has shown to be related to firm value and governance practices. For instance, column
1 highlights that AFFECTED firms are smaller on average when size is measured using
ASSETS, MKTCAP, or REVENUE. This indicates smaller firms are more likely to be affected
by the governance changes included in the listing criteria. The general lack of covariate
balance across firm characteristics that relate to firm value and governance culture suggests
inferences about the statistical and economic significance of empirical evidence might be
unreliable due to extrapolation unless methods are used to identify a suitable sample of control
firms.

2.4. Identification of control


firms

We address the issue of covariate imbalance by matching affected firms with control
firms using their propensity scores. We select this approach for two reasons. First,firms are
matched along the characteristics that relate to firm value and corporate governance, allowing
for a better comparison across firms thus leading to clearer inferences. Second, arguments
advanced elsewhere highlight the challenges faced when using research designs based on event
study and foreign firm matching methodologies to assess the net firm value effects of
regulation (Chhaochharia and Grinstein, 2007; Leuz, 2007). Our approach also responds to
recent criticisms that studies

Table 2 Sample
characteristics.
(1) (2) (3) (4) (5)
Mean Median Q1 Q3 Standard Deviation
Panel A: Descriptive statistics for full sample ASSETS (mm) 2275 558 206 1982 5642
MKTCAP (mm) 3541 637 196 2159 9174 REVENUE (mm) 2644 546 184 1902 5979
AGE (years) 22.1 21.6 17.8 25.7 5.71 CASH 0.125 0.064 0.020 0.166 0.165 CAPEX
0.068 0.044 0.023 0.082 0.074 LEVERAGE 0.320 0.298 0.049 0.501 0.282
SGROWTH 0.162 0.090 −0.004 0.218 0.403 YIELD 0.009 0.000 0.000 0.013 0.018
PPE 0.506 0.208 0.108 0.475 0.847 ROA 0.108 0.121 0.070 0.176 0.133

(1) (2) (3) (4) (5)


AFFECTED (N = 2)
621) t-statistic (1 vs.
AINING (N 2)
61) t-statistic (1 vs.
CONTROL (N = 3)
621) t-statistic (1 vs.
CONTROL (N = 3)
621) t-statistic (1 vs.
t-statistic (1 vs. 3)
2) t-statistic (1 vs.
t-statistic (1 vs. 3)
Please cite this article as: Aggarwal, R., et al., Do corporate governance mandates impact
long-term firm value and governance culture?, J. Corp. Finance (2016),
http://dx.doi.org/10.1016/j.jcorpfin.2016.06.007
Panel B: Mean values for AFF ECTED, REMAINING and CONTROL firms ASSETS (mm)
1168 2884 1283 −6.89*** −0.63 MKTCAP (mm) 1501 3556 1471 −5.21*** 0.11
REVENUE (mm) 1228 2824 1280 −5.90*** −0.24 AGE (years) 19.7 20.5 19.7 −2.28**
−0.12 CASH 0.138 0.124 0.132 1.74* 0.66 CAPEX 0.079 0.065 0.079 4.01*** 0.07
LEVERAGE 0.317 0.330 0.310 −0.82 0.42 SGROWTH 0.138 0.112 0.127 1.17 0.45 YIELD
0.007 0.010 0.007 −3.07*** 0.41 PPE 0.570 0.489 0.536 2.07** 0.66 ROA 0.092 0.086
0.094 0.87 −0.28
This table reports sample characteristics for the sample. Panel A presents descriptive statistics
for the full sample (1998–2007). Panel B presents mean values for the characteristics of
AFFECTED, REMAINING, and CONTROL firms in 2001. AFFECTED firms complied with
three or fewer of the ten governance mandates that were revised in the NYSE and NASDAQ
listing standards. REMAINING firms complied with more than three of the ten mandates.
CONTROL firms are matched to AFFECTED firms using a propensity score matching
procedure. Please see Appendix B for variable definitions, and refer to Table 1 for mean
corporate governance scores for AFFECTED and REMAINING firms. In Panel B, the t-
statistics assess the difference between AFFECTED and REMAINING firms, and AFFECTED
and CONTROL firms in columns 4 and 5, respectively. ***p b 0.01, **p b 0.05, *p b 0.10,
two-tailed tests of statistical significance.
“have not used research designs well adapted” to investigate the net shareholder
value effects of specific regulatory changes (Coates and Srinivasan, 2014).
We address these issues by implementing a new propensity matching algorithm
advocated in Imbens (2014) and Imbens and Rubin (forthcoming). The algorithm
searches for the propensity score model with the highest explanatory power given a
set of covariates. This is achieved with stepwise regression using the firm
characteristics defined in Appendix B, their higher-order terms, interactions among
the covariates, and industry fixed effects. We also include MKTCAP and
REVENUE to allow the algorithm to select from definitions of firm size other than
book value of total assets, and AGE to account for the correlation between firm age
and governance practices (Boone, Fields, Karpoff, and Raheja, 2007).
The algorithm uses covariates measured in 2001, which is two years prior to the
passage of the revised stock exchange listing standards. We use 2001 because it
enables us to identify those firms that will eventually be forced to alter their
corporate governance practices. We then match AFFECTED firms with control
firms without replacement and impose common support in our propensity score
distributions. Thus, we eliminate any affected firm with a propensity score higher
than the largest propensity score of a potential control firm. Similarly, we eliminate
any potential control firm with a propensity score lower than the minimum score of
affected firms. After affected and control firms are matched, we allow firms to exit
the sample across time. We take this approach to avoid introducing “look ahead”
bias by forming our sample using only those firms that survive the entire sample
period. Whenever an affected or control firm in a matched pair exits the sample,
we eliminate its twin for the remainder of the sample period. We use this overall
procedure to construct two separate matching models that are used to form two
separate matched samples—one for our firm value analysis, and one for our
analysis of governance culture.
Column 3 of Table 2 reports descriptive statistics for the CONTROL firms, and
column 5 reports t-statistics that compare AFFECTED firms to CONTROL firms
used in the analysis of long-term value. There is significant improvement in
covariate balance. This can be seen in the lack of statistically significant
differences between the AFFECTED and CONTROL firms for all covariates. For
instance, column 5 highlights that AFFECTED firms are of similar size as matched
control firms in 2001 when size is measured using ASSETS, MKTCAP, or
REVENUE. We also find that all variables are statistically insignificant when we
regress AFFECTED on the covariates used to form the sample, indicating joint
covariate balance (untabulated).
3. Governance mandates and the evolution of firm value
3.1. Governance mandates and firm value
To investigate whether mandated governance changes can have long lasting effects
on firm value and governance culture we first need to determine whether the
mandates themselves have any firm value implications. Hence, we first examine
whether there are relative firm value effects resulting from the governance
mandates in the pre- and post-mandate periods by estimating the regression:
TOBIN0SQ i,t 1⁄4 α0 þ β1AFFECTEDi,t þ β2MANDATESi,t þ β3AFFECTED Ã
MANDATESi,t þ β4SIZEi,t
þ β5AGEi,t þ β6CASHi,t þ β7CAPEXi,t þ β8LEVERAGEi,t þ β9SGROWTHi,t þ β10YIELDi,t
þ β11PPEi,t þ β12ROAi,t þ γINDUSTRY þ γYEAR þ εi,t. ð1Þ
The dependent variable is Tobin's q (TOBIN'S Q). We control for the relation
between value and other firm characteristics using SIZE, CASH, CAPEX,
LEVERAGE, SGROWTH, YIELD, PPE, and ROA (see Appendix B for complete
variable definitions). MANDATES is an indicator variable equal to one for the five-
year period 2003–2007, referred to as the post-mandate period. MANDATES equals
zero for the five-year period 1998–2002, referred to as the pre-mandate period. We
use OLS regression and include industry fixed effects (γINDUSTRY). We also include year fixed
effects (γYEAR) to account for time trends in value that might impact our reliance on the common trends assumption.

The t-statistics are based on standard errors that are robust to heteroskedasticity
and clustered at the firm level.
Table 3 reports the main findings showing the relative impact of the mandates on
firm value. Columns 1–4 present results of estimating Eq. (1) using the unmatched
sample. Column 1 reports that larger firms are associated with higher firm value as
well as firms with greater cash holdings (CASH), capital expenditure intensity
(CAPEX), sales growth (SGROWTH), and return on assets (ROA). Higher leverage
(LEVERAGE) and dividend yield (YIELD) are negatively related to value, which is
consistent with studies on the determinants of firm value (eg, Fama and French,
1998). Column 2 reports a negative and statistically significant coefficient on
AFFECTED, indicating that the firms most affected by mandates have lower firm
value on average. Column 3 shows an insignificant coefficient on MANDATES,
indicating that firms did not have incrementally different valuation during the post-
mandate period after controlling for year fixed effects. Column 4 reports a positive
and significant coefficient on the interaction AFFECTED ∗ MANDATES (p b
0.01), indicating that AFFECTED firms had a relative increase in firm value in the
post-mandate period.
One concern with the analysis reported in columns 1–4 is that the AFFECTED
firms are different from the remaining firms. This idea is supported by a lack of
covariate balance in the unmatched sample (documented in column 4 of Table 2).
We mitigate this concern by estimating Eq. (1) using our matched sample,
described previously. Columns 5–8 of Table 3 report the main findings, with the
reduction in sample size compared with columns 1–4 driven by our use of a
matched sample. The overall pattern of evidence is consistent with the unmatched
sample analysis. In particular, column 8 shows that the coefficient on AFFECTED
∗ MANDATE is positive7 R. Aggarwal et al. / Journal of Corporate Finance xxx (2016) xxx–xxx
Please cite this article as: Aggarwal, R., et al., Do corporate governance mandates
impact long-term firm value and governance culture?, J. Corp. Finance (2016),
http://dx.doi.org/10.1016/j.jcorpfin.2016.06.007
8 R. Aggarwal et al. / Journal of Corporate Finance xxx (2016) xxx–xxx
Table 3 Governance mandates and the evolution of firm value.
Unmatched sample Matched sample
(1)
(2) TOBIN'S Q
TOBIN'S Q
Please cite this article as: Aggarwal, R., et al., Do corporate governance mandates
impact long-term firm value and governance culture?, J. Corp. Finance (2016),
http://dx.doi.org/10.1016/j.jcorpfin.2016.06.007
(3) TOBIN'S Q
(4) TOBIN'S Q
(5) TOBIN'S Q
(6) TOBIN'S Q
(7) TOBIN'S Q
(8) TOBIN'S Q
AFFECTED −0.135*** −0.135*** −0.194*** −0.112*** −0.112*** −0.090**
[0.044] [0.044] [0.062] [0.028] [0.028] [0.042] MANDATES 0.017 −0.014 −0.038
−0.043
[0.049] [0.052] [0.097] [0.103] AFFECTED*MANDATES 0.115*** 0.043**
[0.034] [0.019] SIZE 0.049*** 0.042*** 0.042*** 0.042*** 0.036*** 0.035***
0.035*** 0.035***
[0.015] [0.016] [0.016] [0.016] [0.011] [0.011] [0.011] [0.011] AGE 0.273***
0.278*** 0.278*** 0.279*** 0.643*** 0.660*** 0.659*** 0.509***
[0.101] [0.101] [0.101] [0.101] [0.134] [0.134] [0.134] [0.134] CASH 2.854***
2.845*** 2.845*** 2.847*** 2.564*** 2.566*** 2.565*** 2.902***
[0.162] [0.161] [0.161 ] [0.161] [0.095] [0.095] [0.095] [0.094] CAPEX 1.024***
1.068*** 1.068*** 1.075*** 1.263*** 1.279*** 1.278*** 0.649***
[0.301] [0.301] [0.301] [0.301] [0.216] [0.216] [0.216] [0.204] LEVERAGE
−0.397*** −0.389*** −0.390*** −0.389*** −0.466*** −0.457*** −0.457***
−0.431***
[0.111] [0.111] [0.111] [0.111] [0.054] [0.054] [0.054] [0.055] SGROWTH
0.506*** 0.507*** 0.507*** 0.507*** 0.482*** 0.484*** 0.484*** 0.512***
[0.051] [0.051] [0.051] [0.051] [0.037] [0.037] [0.037] [0.038] YIELD −6.610***
−6.685*** −6.686*** −6.708*** −6.161*** −6.209*** −6.206*** −6.214***
[0.924] [0.920] [0.920] [0.919] [0.864] [0.863] [0.863] [0.858] PPE 0.023 0.026
0.026 0.026 −0.006 −0.006 −0.005 −0.034*
[0.031] [0.031] [0.031] [0.031] [0.021] [0.021] [0.021] [0.019] ROA 1.468***
1.483*** 1.483*** 1.487*** 1.451*** 1.443*** 1.443*** 1.183***
[0.295] [0.293] [0.293] [0.293] [0.119] [0.119] [0.119] [0.119] Intercept 0.520
0.557 0.556 0.572 −0.910 −0.949* −0.908 −0.712
[0.355] [0.353] [0.353] [0.352] [0.561] [0.561] [0.571] [0.470] Industry fixed
effects Yes Yes Yes Yes Yes Yes Yes Yes Year fixed effects Yes Yes Yes Yes
Yes Yes Yes Yes N 17,732 17,732 17,732 17,732 9038 9038 9038 9038 Adj-R2
0.25 0.25 0.25 0.25 0.24 0.24 0.24 0.24
This table reports coefficient estimates and standard errors [in brackets] from an
investigation of the value of affected firms before and after the implementation of
corporate governance mandates included in the NYSE and NASDAQ listing
standards. AFFECTED firms complied in 2001 with three or fewer of the ten
governance mandates that were revised in the NYSE and NASDAQ listing
standards. In columns 1–4, the remaining firms in the unmatched sample complied
in 2001 with more than three of the ten mandates. In columns 5–8, the control
firms complied in 2001 with more than three of the ten mandates and are matched
to AFFECTED firms using a propensity score matching procedure. Please see
Appendix B for variable definitions. Industry fixed effects and year fixed effects
are included in all regressions but are omitted from the table for brevity. The t-
statistics are robust to heteroskedasticity and clustered at the firm level. ***p b
0.01, **p b 0.05, *p b 0.10, two-tailed tests of statistical significance.
and statistically significant (p b 0.05) when using the matched sample. Overall, the
evidence presented in Table 3 indicates that affected firms had a relative increase
in firm value in the post-mandate period compared to unmatched firms or matched
control firms. In other words, we document a tightening of the “value gap”
between affected and control firms after the implementation of governance
mandates.
3.2. Potential concerns regarding time trends in firm value
One potential concern regarding the results presented in the prior sub-section is
that the relative increase in AFFECTED firm value relates to trends in Tobin's q
that occur well before or after the implementation of governance mandates. If so,
this would cast doubt that the evidence is related to governance mandates rather
than a confounding event that occurs during the post-mandate window that
differentially impacts affected and control firms in our sample. This concern is
important for our analysis because arguments advanced elsewhere indicate that the
disparate evidence from studies of the impacts of regulation likely relate to overall
trends rather than the impact of regulation per se (Coates and Srinivasan, 2014).
We address this potential concern in three ways. First, the analysis presented in
Table 3 includes year fixed effects, which accounts for differences in time trends
between firms more affected by the mandates and those less affected. Second, in
untabulated analysis we take a relatively less stringent approach to account for
time trends and augment Eq. (1) with a time trend variable and remove year fixed
effects from the equation. We find a similar overall pattern of evidence as that
reported in Table 3.
Our third approach is particularly stringent—we modify Eq. (1) by interacting
AFFECTED with year fixed effects and remove MANDATES from the equation.
This strategy tests for individual year effects, and provides insight into the
evolution of firm value in the post-mandate period. Table 4 presents our main
findings using the propensity score matched sample. Column 1 reports that,
relative to the 2002–2003 period in which firms first became aware of potential
changes in the governance mandates included in listing standards, the coefficients
on the interaction terms are insignificant through 2001. This indicates a lack of
year-specific firm value effects
9 R. Aggarwal et al. / Journal of Corporate Finance xxx (2016) xxx–
xxx

for AFFECTED versus CONTROL firms during the pre-mandate period. However, the
coefficients on the interaction terms become positive and statistically significant throughout
the period 2004–2006, indicating that affected firms had a tightening of the “value gap” after
the enactment of mandates. There is no significant difference in 2007, potentially indicating an
end to the improvement in relative value.

3.3. Assessing the economic magnitude of mandates


on the “value gap”

In the prior-subsections, we present evidence that firms that are more affected by new
governance mandates have a relative increase in long-term value. While the evidence is
significant in a statistical sense, our research design enables us to shed light on the economic
importance of our results. Specifically, the results reported in Table 3 indicate the following.
For the analysis using the unmatched sample (column 4, Table 3), an F-test of the equality of
the coefficients on AFFECTED and AFFECTED ∗ MANDATES indicates that the coefficients
are statistically different from one another (Prob. N F = 0.00). While affected firms had
relatively lower firm value in the pre-mandate period, this “value gap” is reduced by 59%
(0.115/−0.194) in the post-mandate period. A more stringent test is to use the coefficients
reported for the matched sample (column 8, Table 3). An F-test of the equality of the
coefficients on AFFECTED and AFFECTED*MANDATES indicates that the coefficients are
statistically different from one another (Prob. N F = 0.07), indicating the “value gap” is
reduced by 48% (0.043/−0.090) in the post-mandate period.

4. Governance mandates and the evolution of


governance culture

The prior section reports a tightening of the “value gap” between affected firms and
their peers following the adoption of governance mandates; nonetheless, a “value gap”
remains. We next investigate a potential channel through which the value gap persists. While
governance mandates forced affected firms to alter specific governance practices, it is possible
that the mandates had a spillover effect on the broader governance culture of firms. The
spillover effect could have an on-going role in the difference in value between affected and
control firms. In this section, we present evidence consistent with this conjecture by examining
the evolution of non-mandated governance among affected and control firms in the post-
mandate period.

Table 4 Governance mandates and the


evolution of firm value: time trend.
(1) TOBIN'S Q
AFFECTED −0.102**
[0.044] AFFECTED
∗ 1998 −0.014
[0.110] AFFECTED
∗ 1999 −0.144
[0.105] AFFECTED
∗ 2000 −0.022
[0.098]
AFFECTED ∗ 2001 0.098
[0.092]
AFFECTED*2004 0.104***
[0.038] AFFECTED ∗ 2005 0.094** [0.040] AFFECTED ∗ 2006 0.075*
[0.046]
AFFECTED ∗ 2007 0.050
[0.055] Controls
Yes Industry fixed effects Yes Year fixed effects Yes N 9038 Adj-R2 0.24
This table reports coefficient estimates and standard errors [in brackets] from
an investigation of the value of affected firms before and after the
implementation of corporate governance mandates included in the NYSE
and NASDAQ listing standards. AFFECTED firms complied in 2001 with
three or fewer of the ten governance mandates that were revised in the NYSE
and NASDAQ listing standards. The control firms complied in 2001 with
more than three of the ten mandates and are matched to AFFECTED firms
using a propensity score matching procedure. Please see Appendix B
variable definitions. Control variables included in the models are those
reported in Table 3. The intercept, industry fixed effects, and year fixed
effects are included in all regressions but are omitted from the table for
brevity. The t-statistics are robust to heteroskedasticity and clustered at the
firm level. ***p b 0.01, **p b 0.05, *p b 0.10, two-tailed tests of statistical
significance.

Please cite this article as: Aggarwal, R., et al., Do corporate governance mandates impact
long-term firm value and governance culture?, J. Corp. Finance (2016),
http://dx.doi.org/10.1016/j.jcorpfin.2016.06.007
10 R. Aggarwal et al. / Journal of Corporate Finance xxx (2016) xxx–xxx
4.1. Evolution of governance culture
We examine the evolution of governance culture by estimating the regression:
GOVERNANCEi,t 1⁄4 α0 þ β1AFFECTEDi,t þ β2AFFECTED Ã YEARi,t þ β3SIZEi,t þ
β4ROAi,t
þβ5SGROWTHi,t þ γINDUSTRY þ γYEAR þ εi,t.
Please cite this article as: Aggarwal, R., et al., Do corporate governance mandates
impact long-term firm value and governance culture?, J. Corp. Finance (2016),
http://dx.doi.org/10.1016/j.jcorpfin.2016.06.007
ð2Þ
The dependent variable represents one of four governance measures: GOV31,
Board, Anti-takeover, or Compensation, defined previously. We control for the
association between governance practices andfirm characteristics usingSIZE, ROA,
andSGROWTH, defined previously. The interaction term represents the interaction
of AFFECTED with year fixed effects (γYEAR) for the period 2003–2008; the year 2003 is the
omitted year. We use ordinary least squares regression and include industry fixed
effects (γINDUSTRY). The t-statistics are based on standard errors that are robust to
heteroskedasticity and clustered at the firm level.
Table 5 reports results of estimating Eq. (2) using a matched sample of
AFFECTED firms for which we have GOV31 data. We construct this matched
sample using the matching procedure discussed previously. Column 1 shows that
in the post-mandate period affected firms have fewer of the non-mandated
corporate governance attributes that go beyond those mandated by the revised
NYSE and NASDAQ listing criteria. Column 1 also shows that affected firms have
a relative increase in GOV31 beginning in 2005 and continues through 2008. This
indicates that the overall governance culture of affected firms evolve towards
relatively more shareholder friendly boardroom practices on non-mandated
dimensions of governance compared to their matched peers. Moreover, this
evolution is somewhat gradual with relative differences not emerging until 2005.
Columns 2–4 shed more light on these differences by examining the three GOV31
sub-categories. Column 2 shows that affected firms on average had fewer Board
related practices, and there is a relative improvement beginning in 2006. Column 3
reports that such firms on average had better Anti-takeover related governance, and
no consistent pattern of relative change across the post- mandate period. Column 4
documents that affected firms had fewer Compensation related practices, and that
the governance culture of affected firms evolve towards relatively more
shareholder friendly attributes from 2005 through 2008. Overall, the evidence in
Table 5 indicates that after mandates are put into effect, the overall governance
culture of affected firms becomes relatively more share- holder friendly across
non-mandated governance practices. This evidence suggests that governance
mandates relate to a favorable spillover to non-mandated governance practices
among those firms most affected by governance regulation.
Table 5 Governance mandates and the evolution of governance culture.
(1) GOV31
(4) Compensation
AFFECTED −0.018*** −0.015* 0.026** −0.064***
[0.006] [0.008] [0.012] [0.010] AFFECTED ∗ 2004 0.003 0.003 −0.017** 0.016
[0.005] [0.007] [0.009] [0.010] AFFECTED ∗ 2005 0.011* 0.011 −0.009 0.030***
[0.006] [0.007] [0.011] [0.011] AFFECTED ∗ 2006 0.021*** 0.021** 0.002
0.035***
[0.007] [0.008] [0.013] [0.013] AFFECTED ∗ 2007 0.013* 0.011 −0.022 0.033**
[0.008] [0.009] [0.015] [0.015] AFFECTED ∗ 2008 0.017** 0.023** −0.029
0.040** [0.008] [0.010] [0.016] [0.016] SIZE 0.024*** 0.022*** −0.002 0.051***
[0.002] [0.003] [0.005] [0.003] ROA −0.001 0.016 −0.001 0.008
[0.018] [0.022] [0.038] [0.030] SGROWTH −0.007 −0.009* −0.004 −0.009
[0.004] [0.005] [0.009] [0.008] Intercept 0.339*** 0.245*** 0.493*** 0.398***
[0.043] [0.033] [0.092] [0.050] Industry fixed effects Yes Yes Yes Yes Year fixed
effects Yes Yes Yes Yes N 3720 3720 3720 3720 Adj-R2 0.30 0.22 0.05 0.44
This table reports coefficient estimates and stan dard errors [in brackets] from
ordinary least squares regressions of the evolution of governance culture of
affectedfirms since the implementation of corporate governance mandates included
in the NYSE and NASDAQ listing standards. Please see Appendix B for variable
definitions. The intercept, industry fixed effects, and yearfixed effects are omitted
for brevity. The t-statistics are robust to heteroskedasticity and clustered at the firm
level. ***p b 0.01, **p b 0.05, *p b 0.10, two-tailed tests of statistical significance.
(2)
(3) Board
Anti-Takeover
11 R. Aggarwal et al. / Journal of Corporate Finance xxx (2016) xxx–
xxx

4.2. Relating the value gap and


governance culture
Tables 3–5 highlight how firms with governance practices that did not meet the revised
US stock exchange listing criteria continue to have lower firm value and different governance
cultures in the post-mandate period compared with matched control firms. We next attempt to
shed light on whether the differences in non-mandated governance relate to the persistent value
gap. The purpose of this evidence is not to provide causal inferences but rather to present
correlations that assist in understanding whether on-going differences in non-mandated
governance practices indeed serves as a channel through which the value gap could persist.
Table 6 presents results of this analysis using our sample of affected and matched firms
in the post-mandate period. Columns 1–5 show that AFFECTED firms continue to have lower
firm value relative to control firms, consistent with our evidence of a value gap in the post-
mandate period. This can be seen from the negative and statistically significant coefficient on
AFFECTED in each column. Column 1 shows a positive correlation between value and
GOV31, indicating that some of the difference in value between affected firms and their peers
relates to differences in their non-mandated governance in the post-mandate period—that is, to
differences in their overall governance culture.
Columns 2–4 assess the source of this correlation by examining each of the sub-
categories of governance culture. Overall, it is the aspects of board-level governance culture
that relates most strongly to value. This can be seen from the positive and significant relation
between value and Board, and the insignificant relations between value and the Anti-Takeover
and Compensation measures. Column 5 further supports this evidence by showing that Board
relates favorably with value after controlling for Anti-Takeover and Compensation related
attributes. Across all columns, the pattern of evidence for the control variables suggests that
any remaining differences between firms in the matched sample regarding SIZE, AGE, YIELD,
and PPE do not explain variation in Tobin's q. Taken together, we conclude that the persistent
value gap (see Tables 3 and 4) and on-going differences in non-mandated governance

Table 6 Post-mandate relation between firm


value and governance culture.
(1) TOBIN'S Q (4) TOBIN'S Q
TOBIN'S Q (4) TOBIN'S Q
(3) TOBIN'S Q (4) TOBIN'S Q
(3) TOBIN'S Q (5) TOBIN'S Q
(5) TOBIN'S Q (5) TOBIN'S Q
(5) TOBIN'S Q

Please cite this article as: Aggarwal, R., et al., Do corporate governance mandates impact
long-term firm value and governance culture?, J. Corp. Finance (2016),
http://dx.doi.org/10.1016/j.jcorpfin.2016.06.007
AFFECTED −0.098** −0.100** −0.102** −0.095** −0.092**
[0.042] [0.042] [0.042] [0.041] [0.042] GOV31 0.588** [0.294]
Board 0.429* 0.453*
[0.256] [0.273] Anti-takeover −0.010 −0.089
[0.167] [0.172] Compensation 0.180
0.116
[0.186] [0.186] SIZE
−0.013 −0.008 0.002 −0.007 −0.015
[0.029] [0.028] [0.028] [0.032] [0.032] AGE 0.084 0.083 0.090
0.088 0.082
[0.168] [0.168] [0.169] [0.170] [0.169] CASH 2.397*** 2.403***
2.398*** 2.401*** 2.408***
[0.255] [0.255] [0.255] [0.256] [0.255] CAPEX 1.045** 1.047** 1.037** 1.062** 1.074**
[0.515] [0.514] [0.513] [0.514] [0.517] LEVERAGE −0.111 −0.108 −0.114 −0.113 −0.106
[0.203] [0.202] [0.203] [0.202] [0.202] SGROWTH 0.591***
0.590*** 0.584*** 0.586*** 0.590***
[0.112] [0.112] [0.111] [0.111] [0.111] YIELD −2.710 −2.742
−2.623 −2.625 −2.739
[1.738] [1.728] [1.750] [1.755] [1.734] PPE −0.040 −0.043 −0.045
−0.043 −0.043
[0.058] [0.058] [0.059] [0.058] [0.058] ROA 1.917*** 1.910***
1.906*** 1.906*** 1.907***
[0.539] [0.539] [0.541] [0.539] [0.538] Intercept 1.106* 1.181**
1.217** 1.174** 1.190*
[0.596] [0.596] [0.615] [0.592] [0.608] Industry fixed effects Yes
Yes Yes Yes Yes Year fixed effects Yes Yes Yes Yes Yes N 3720 3720 3720 3720 3720
Adj-R2 0.22 0.22 0.22 0.22 0.22
This table reports coefficient estimates and standard errors [in brackets] from ordinary least
squares regressions of the correlation between firm value and governance culture since the
implementation of corporate governance mandates included in the NYSE and NASDAQ
listing standards. Please see Appendix B for variable definitions. Industry fixed effects and
year fixed effects are included in all regressions but are omitted from the table for brevity. The
t-statistics are robust to heteroskedasticity and clustered at the firm level. ***p b 0.01, **p b
0.05, *p b 0.10, two-tailed tests of statistical significance.
12 R. Aggarwal et al. / Journal of Corporate Finance xxx (2016) xxx–xxx
practices (see Table 5) are correlated, suggesting that on-going aspects of
governance culture help explain variation in post-mandate firm value of affected
firms and their peers.
4.3. Evolution of specific governance practices
We next examine changes in individual governance practices to shed light on the
evolution of governance culture within affected firms. This analysis is motivated
by the evidence reported in Table 5 that shows important differences across the
governance sub-categories. In particular, we examine the individual attributes that
comprise the Board and Compensation sub-categories, which drive the change in
non-mandated governance among affected firms across the post-mandate period.
Because each attribute is an indicator variable, we estimate the probit regression:
Pr ð ATTRIBUTE 1⁄4 1 Þ 1⁄4 Φðαþ β0 4ROAþ β1i,t AFFECTEDþ β5SGROWTHi,t þ β2i,t
AFFECTED þ γINDUSTRY Ã YEARþ γi,t YEAR þ βþ 3SIZEεi,tÞ. i,t ð3Þ
ATTRIBUTE represents the governance attribute of interest (see Appendix A for
details). We control for the association between governance and firm
characteristics using SIZE, ROA, and SGROWTH. Because Eq. (3) is nonlinear, we
compute the interactive effect AFFECTED ∗ YEAR by examining the extent to
which the marginal effect of AFFECTED changes in response to individual year
fixed effects (γYEAR). Eq. (3) includes industry fixed effects (γINDUSTRY), and standard
errors are robust to heteroskedasticity and clustered at the firm level.
4.3.1. Board-level governance practices
We examine each non-mandated Board attribute, and report in Table 7 the
practices for which differences between AFFECTED and control firms are present.
While the aggregate governance measure (ie, GOV31) indicates that affected firms
on average evolve towards a relatively more shareholder friendly board (see Table
6), this relation appears most strongly related to the evolution of board size in
particular. This can be seen in column 1, which reports that affected firms are more
likely to adopt an “appropriate” board size relative to their peers in the period after
the governance mandates. This is consistent with Linck, Netter, and Yang (2009),
which finds firms appear to comply with independent board requirements by
changing board size.
The results in columns 2–4, by contrast, highlight how the analysis of individual
governance attributes provides new insights into the boardroom practices that do
not change in a relative sense within affectedfirms. Column 2 reports that affected
firms are relatively more likely to have a CEO who engages in related-party
transactions (that is, less likely to not have a related party transaction). The
interaction terms indicate that this relation weakened in 2004, but persists post-
mandate. This can be seen from the positive coefficient on the interaction with
2004, and the insignificant results for the remaining years.
Table 7 Governance mandates and the evolution of governance culture: board
provisions.
(1) (2) (3) (4)
Recommended board size Absence of related-party transaction Presence of
governance committee Director resignation requirement
AFFECTED −0.025** −0.047** −0.140*** −0.100**
[0.012] [0.019] [0.032] [0.040] AFFECTED ∗ 2004 0.006 0.033** 0.007 0.005
[0.012] [0.015] [0.033] [0.043] AFFECTED ∗ 2005 0.008 0.009 0.013 0.058
[0.014] [0.023] [0.037] [0.049] AFFECTED ∗ 2006 0.019* −0.002 0.076** 0.030
[0.011] [0.028] [0.032] [0.050] AFFECTED ∗ 2007 0.024** −0.006 0.078** 0.035
[0.011] [0.042] [0.038] [0.052] AFFECTED ∗ 2008 0.028** 0.010 0.060 0.097
[0.011] [0.054] [0.056] [0.060] Controls Yes Yes Yes Yes Industry fixed
effects
Please cite this article as: Aggarwal, R., et al., Do corporate governance mandates
impact long-term firm value and governance culture?, J. Corp. Finance (2016),
http://dx.doi.org/10.1016/j.jcorpfin.2016.06.007
Yes Yes Yes Yes
Year fixed effects Yes Yes Yes Yes N 3720 3720 3720 3720 AUROCC 0.78 0.73
0.82 0.79
This table repo rts average marginal effects and standard errors [in brackets] from
probit regressions of the evolution of affected firms' governance culture since the
implementation of governance mandates included in the NYSE and NASDAQ
listing standards. The dependent variables are individual board provisions; please
refer to Panel A of Appendix A for details. With the exception of interaction terms,
all marginal effects are computed using the average of partial changes over all
observations. The marginal effect of AFFECTED changes in response to year.
Control variables are SIZE, ROA, and SGROWTH; please see Appendix B for
variable definitions. The intercept, industry fixed effects, and yearfixed effects are
included in all regressions but are omitted from the table for brevity. Standard
errors are clustered at the firm level. AUROCC is the area under the receiver-
operating characteristic (ROC) curve. ***p b 0.01, **p b 0.05, *p b 0.10, two-
tailed tests of statistical significance.
13 R. Aggarwal et al. / Journal of Corporate Finance xxx (2016) xxx–
xxx

Column 3 reports mixed evidence regarding affected firms' use of a stand-alone


governance committee. While the likelihood of having such a committee increases in a relative
sense in 2006 and 2007 for affected firms, the insignificant coefficient in 2008 indicates that
affected firms continue to be less likely to have this committee relative to their peers. As the
governance committee is typically responsible for director and committee nominations and for
taking a leadership role in shaping the corporate governance of a corporation, a lower
likelihood of having such a committee is viewed as being shareholder unfriendly. Column 4
reports that affected firms are less likely to require directors to submit their resignation upon a
change in employment, and this relation does not evolve in a relative sense across the post-
mandate period.

4.3.2. Directors' and officers' compensation and


ownership practices
We next examine each non-mandated Compensation attribute, and report in Table 8 the
practices for which differences between AFFECTED and control firms are present. While the
aggregate governance measure indicates that affected firms on average evolve towards a
relatively more shareholder friendly board (see Table 6), this relation appears most strongly
related to the evolution of stock option repricing in particular. This can be seen in column 1,
which reports that affected firms are more likely to adopt policies that prohibit stock option
repricing relative to their peers in the period after the governance mandates.
The results in columns 2–6, by contrast, document the boardroom practices that do not
change in a relative sense within affected firms. Columns 2 and 3 report that affected firms on
average are relatively less likely to have stock ownership requirements for their directors and
to subject executives to stock ownership guidelines, respectively. Columns 4 and 5 show that
these firms are relatively less likely to compensate directors with stock and to align executive
compensation with stock performance, respectively. We note, however, that there is some
evidence that affected firms became more likely to link director compensation with firm
performance and use stock in compensation which aligns their compensation with shareholder
interests. This can be seen by the positive and significant coefficients on the interactions
between AFFECTED and the years 2006 and 2007 for director compensation (in column 3),
and 2004 and 2005 for the use of stock in compensation (in column 4). However, by 2008
these interactions are insignificant, indicating no difference in the adherence to these non-
mandated attributes five years after the implementation of governance mandates. Column 6
shows that affected firms on average are less likely to abide by preferred directors' and officers'
stock ownership guidelines, although there was a marginal improvement by 2008.

4.3.3. Summary
Tables 7 and 8 provide new insights into the governance culture of affected firms in the
post-mandate period. Overall, while the evolution of board size and option repricing policies
become relatively more shareholder friendly, it is important to note that affected firms
continue to have less shareholder friendly governance attributes compared with their peers
across the post- mandate period. These practices include on-going related-party transactions,
the lack of a governance committee responsible for nominating directors, and broad-based use
of compensation practices that are widely seen as less shareholder friendly. The individual

Table 8 Governance mandates and the evolution of


governance culture: compensation and ownership.
(1) (2) (3) (4) (5) (6)
Repricing prohibited Director ownership Executive ownership
Director fees Options align with Officers' and directors'
ownership

Please cite this article as: Aggarwal, R., et al., Do corporate governance mandates impact
long-term firm value and governance culture?, J. Corp. Finance (2016),
http://dx.doi.org/10.1016/j.jcorpfin.2016.06.007
AFFECTED −0.148*** −0.062* −0.084*** −0.029** −0.067* −0.123***
[0.035] [0.035] [0.032] [0.014] [0.034] [0.025] AFFECTED ∗
2004 0.043 0.003 0.0150 0.006 0.091* 0.003
[0.031] [0.034] [0.025] [0.013] [0.047] [0.017] AFFECTED ∗
2005 0.162*** 0.030 −0.008 −0.005 0.084** 0.007
[0.044] [0.040] [0.030] [0.017] [0.042] [0.020] AFFECTED ∗
2006 0.172*** −0.007 0.002 0.029** 0.050 0.044*
[0.039] [0.040] [0.034] [0.013] [0.049] [0.026] AFFECTED ∗
2007 0.172*** 0.005 0.0260 0.027* 0.019 0.038
[0.042] [0.044] [0.041] [0.014] [0.054] [0.031] AFFECTED ∗
2008 0.208*** 0.016 0.048 0.006 0.046 0 .059*
[0.043] [0.048] [0.046] [0.026] [0.057] [0.032] Controls Yes Yes
Yes Yes Yes Yes Industry fixed effects Yes Yes Yes Yes Yes Yes Year fixed effects
Yes Yes Yes Yes Yes Yes N 3720 3720 3720 3720 3720 3720 AUROCC 0.85 0.82
0.83 0.73 0.86 0.69
This table reports average marginal effects and standard errors [in brackets] from probit
regressions of the evolution of affected firms' governance culture since the implementation of
corporate governance mandates included in the NYSE and NASDAQ listing standards. The
dependent variables are individual compensation and ownership provisions; please refer to
Panel D of Appendix A for details. With the exception of interaction terms, all marginal effects
are computed using the average of partial changes over all observations. The marginal effect of
AFFECTED changes in response to year. Control variables areSIZE, ROA, and SGROWTH;
please see Appendix B for variable definitions. The intercept, industry fixed effects, and year
fixed effects are included in all regressions but are omitted from the table for brevity. Standard
errors are clustered at the firm level. AUROCC is the area under the receiver-operating
characteristic (ROC) curve. ***p b 0.01, **p b 0.05, *p b 0.10, two-tailed tests of statistical
significance.
14 R. Aggarwal et al. / Journal of Corporate Finance xxx (2016) xxx–
xxx

practices are likely to be important for long-term value, indicating that affected firms continue
to have a governance culture that is relatively less shareholder friendly well after the
implementation of governance mandates.

5. Robustness

5.1. Alternative measure of affected


firms

In the prior sections, we focused on ten mandates to assess the extent to which firms
were affected by revisions to the corporate governance listing standards. There are two
potential criticisms of this approach. First, it requires that each mandate receive equal
weighting. In our research setting, it is likely the case that some governance practices relate
more strongly to firm value than others. For instance, our approach places equal weight on the
board independence and adopting governance guidelines mandates despite the likelihood that
the former action will have a stronger relation to firm value than the latter. Second, a focus on
ten mandates limits our ability to shed light on the specific mandates that have firm value
implications.
We address these two concerns by focusing the analysis on three aspects of the CEO's
bargaining power over the board: majority of independent directors, an independent
compensation committee, and an independent nominating committee. These three practices are
consistent with the NYSE's reasoning behind strengthening the independence requirement
when revising the listing standards: “Requiring a majority of independent directors will
increase the quality of board oversight and lessen the possibility of damaging conflicts of
interest.” We thus redefine affected firms to be those with existing governance practices that
are inconsistent with all of the board independence mandates in 2001. We then follow our
propensity score matching algorithm to identify a sample of CONTROL firms. If regulations
relate positively to value, as shown in Table 3, then we should continue to find this positive
relation using our alternative measure of affected firms. As expected, the results of this
analysis using the alternative measure of affected firms are consistent with the findings
presented in Table 3 (untabulated).

5.2. Alternative definition of firm


value

In our primary analysis we compute firm value using Tobin's q measured as [(total
assets + market value of equity − total common equity − deferred taxes) / total assets]. We
assess the robustness of our results regarding the relation between governance mandates and
value using alternative methods to compute Tobin's q (ie, retaining deferred taxes, using
lagged total assets in the denominator) as well as simply using price-to-book. Our results are
robust to using these alternative definitions of firm value (untabulated).

5.3. Confounding events

Other events related to macroeconomic news could be occurring simultaneously with


the change in NYSE and NASDAQ listing stan- dards. Thus, one concern with our analysis of
firm value and governance culture is that the relations we document might not be attrib- utable
to governance regulation, but to the coincident macroeconomic events that occurred in the
period around which listing standards were changed. This might explain why we find relative
changes in affected firm value in the period after regulation was put in place. However, to
explain our results, it must also be the case that the response to macroeconomic news
systematically varies with our iden- tification of affected firms using the ten mandates (our
primary analysis) and using the three monitoring-related mandates (our robust- ness test
described previously).
In addition, we have taken several steps to address the potential concern regarding
confounding events. First, we include year fixed effects in all regressions that assess the
impact of the new governance mandates on firm value (evidence presented in Tables 3).
Second, in untabulated analysis we account for potential macroeconomic trends using a year
trend variable (after removing year fixed effects). Third, we interact our measure of affected
firms with individual year effects to assess whether the impact of mandates on firm value and
governance culture indeed occurred in the period after the regulations were put into place
(evidence presented in (evidence presented in Tables 4-5 and 7-8). Overall, confounding
macroeconomic news does not appear to be driving our collective firm value results.

6. Conclusion

Regulators around the world continue to develop reforms that target the corporate
governance shortcomings of their listed firms. These countries have stated goals of the
mandates providing motivation for and guidelines on changing corporate governance culture,
which will ultimately drive long-term firm value. Using as a quasi-natural experiment around
the implementation of new US stock exchange listing standards, motivated by the Sarbanes-
Oxley Legislation, that mandated the adoption of certain corporate governance practices that
are of global focus, this paper examines the long-term value implications of forced compliance
with new governance reforms and how boards that were forced to comply alter their overall
governance culture.
We compare the value of firms that are more affected by the mandates to that of firms
that are less affected (control firms), controlling for firm characteristics known to be related
tofirm value and governance. The results show that affected firms had lower firm value than
control firms in the pre-mandate period, and have a relative increase in value after the
implementation of the mandates. Despite this relative increase in value, a “value gap” between
the affected and control firms remains throughout the sample period. We then set out to
investigate whether the value gap relates to differences in the non-mandated boardroom
practices of affected and con- trol firms.

Please cite this article as: Aggarwal, R., et al., Do corporate governance mandates impact
long-term firm value and governance culture?, J. Corp. Finance (2016),
http://dx.doi.org/10.1016/j.jcorpfin.2016.06.007
15 R. Aggarwal et al. / Journal of Corporate Finance xxx (2016) xxx–
xxx

We define governance culture as the set of corporate governance practices beyond


those mandated by new regulations. Our analysis shows that even though the affected firms
comply with governance mandates, there exists overall less shareholder friendly governance
between the affected and control firms in the post-mandate period. Importantly, we show that
the value gap is related to this less share- holder friendly governance culture. As such, a key
takeaway of the study is that mandated governance provisions had spillover effects on aspects
of governance beyond those mandated, but many of the less shareholder friendly practices that
were a part of affected firms' governance culture persist following regulation. It appears that
factors present within the affected firms at the time mandates are enforced have lingering
effects on firm value and governance practices, which provides important insights into the
potential success of global efforts to improve overall governance culture by implementing new
governance mandates.

Appendix A. Firm-level corporate


governance practices

This table presents the 41 governance practices included in the governance index
organized into four subcategories: board, audit, anti-takeover provisions, and compensation
and ownership.
* indicates practices included in the revised stock exchange
listing standards.

Panel A: Board 1. All directors attended 75% of


board meetings or had a valid excuse. 2. CEO serves
on the boards of two or fewer public companies. 3.
Board is controlled by N50% independent outside
directors *. 4. Board size is at greater than five but
less than sixteen. 5. CEO is not listed as having a
related-party transaction. 6. Compensation committee
composed solely of independent outsiders *. 7.
Chairman and CEO positions are separated, or there is
a lead director. 8. Nominating committee composed
solely of independent outsiders *. 9. Governance
committee exists and met in the past year. 10.
Shareholders vote on directors selected to fill
vacancies. 11. Governance guidelines are publicly
disclosed *. 12. Annually elected board (no staggered
board). 13. Policy exists on outside directorships (four
or fewer boards is the limit). 14. Shareholders have
cumulative voting rights. 15. Shareholder approval is
required to increase/decrease board size. 16. Majority
vote requirement to amend charter/bylaws (not
supermajority). 17. Board has the express authority to
hire its own advisers. 18. Performance of the board is
reviewed regularly *. 19. Board-approved succession
plan in place for the CEO *. 20. Outside directors
meet without CEO and disclose number of times met
*. 21. Directors are required to submit resignation
upon a change in job. 22. Board cannot amend bylaws
without shareholder approval or can do so under
limited circumstances. 23. Does not ignore shareholder
proposal. 24. Qualifies for proxy contest
defenses combination points.
Panel B: Audit committee 25. Consulting fees paid
to auditors are less than audit fees paid to auditors
*. 26. Audit committee composed solely of
independent outsiders *. 27. Auditors ratified at
most recent annual meeting.
Panel C: Anti-takeover provisions 28. Single
class, common. 29. Majority vote requirement to
approve mergers (not supermajority). 30.
Shareholders may call special meetings. 31.
Shareholders may act by written consent. 32.
Firm either has no poison pill or a pill that is
shareholder approved. 33. Firm is not authorized
to issue blank check preferred stock.
Panel D: Compensation and ownership 34. Directors are
subject to stock ownership requirements. 35. Officers are
subject to stock ownership guidelines. 36. No interlocks
among compensation committee members. 37. Directors
receive all or a portion of their fees in stock. 38. All
stock-incentive plans adopted with shareholder approval
*. 39. Options grants align with firm performance and
reasonable burn rate. 40. Officers' and directors' stock
ownership is at least 1% but not over 30% of total shares
outstanding. 41. Repricing
prohibited.

Please cite this article as: Aggarwal, R., et al., Do corporate governance mandates impact
long-term firm value and governance culture?, J. Corp. Finance (2016),
http://dx.doi.org/10.1016/j.jcorpfin.2016.06.007
16 R. Aggarwal et al. / Journal of Corporate Finance xxx (2016) xxx–
xxx

Appendix B. Variable
definitions

Variable Definition
AFFECTED Indicator variable equal to one for firms that complied in 2001 with three or
fewer of the ten governance mandates that were revised in
the NYSE and NASDAQ listing standards, and zero otherwise. TOBIN'S Q
Book value of total assets plus market value of equity minus total common equity minus
deferred income taxes divided by total assets. ASSETS Book value of total assets
REVENUE Total revenue MKTCAP Market capitalization of equity AGE Number of years
the firm has been a public company SIZE Logarithmic transformation of ASSETS CASH
Ratio of total cash and cash equivalents to lagged book value of total assets CAPEX Ratio
of capital expenditure to lagged book value of total assets LEVERAGE Ratio of long-term
debt plus debt in current liabilities to the sum plus stockholders' equity SGROWTH Growth
in total revenues YIELD Ratio of total dividends to market value of equity PPE Ratio of
property, plant, and equipment to total revenue ROA Ratio of income before extraordinary
items to book value of total assets MANDATES Indicator variable equal to one for the years
2003 through 2006, referred to as the post-mandate period. MANDATES equals zero for the
years 1998 through 2001, referred to as the pre-mandate period. GOV41
(GOV31) Composite index of 41 (31) individual governance practices, assigning a value
of one to each attribute if the firm meets minimally
acceptable guidelines on that attribute, and zero otherwise. Expressed as a
percentage. See Appendix A for the 41 practices. The data source is
RiskMetrics.

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Please cite this article as: Aggarwal, R., et al., Do corporate governance mandates impact
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http://dx.doi.org/10.1016/j.jcorpfin.2016.06.007