Anda di halaman 1dari 14

CORFIN-01053; Tidak ada dari Pages 16

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 dapat memengaruhibanyak 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, RiskMetrics definisidari 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 digit klasifikasiuntuk 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 signi ficance 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 = 621) t-statistic (1 vs. 2)


G (N = 1361) t-statistic (1 vs. 3)
CONTROL (N = 621) t-statistic (1 vs. 3)
CONTROL (N = 621) t-statistic (1 vs. 3)
t-statistic (1 vs. 2) t-statistic (1 vs. 3)
t-statistic (1 vs. 2)
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 signi ficant
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
7 R. Aggarwal et al. / Journal of Corporate Finance xxx (2016) xxx–xxx
coefficient on AFFECTED ∗ MANDATE is positive
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. Speci fically, 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 affected firms 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 signi ficant 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


BIN'S Q (5) TOBIN'S Q
(3) TOBIN'S Q (5) TOBIN'S Q
(3) TOBIN'S Q (5) TOBIN'S Q
(4) TOBIN'S Q (5) TOBIN'S Q
(4) 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.
ð3Þ
i,t

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 insigni ficant,
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 de finitions 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.

References

Acharya, V., Volpin, P., 2010. Corporate governance externalities. Eur. Finan. Rev. 14, 1–33. Aggarwal, R., Erel, I., Stulz, R., Williamson, R., 2009. Differences in governance practices between US and foreign firms:
measurement, causes, and consequences. Rev.
Financ. Pejantan. 22, 3131–3169. Aggarwal, R., Erel, I., Ferrera, M., Matos, P., 2011. Does governance travel around the world? Evidence from institutional investors. J. Financ. Econ. 100, 154–181.
Bebchuk, L., Cohen, A., Ferrell, A., 2009. What matters in corporate governance? Rev. Financ. Pejantan. 22 (2), 783–827. Boone, AL, Field, LC, Karpoff, JM, Raheja, CG, 2007. The determinants of corporate board size
and composotion: An empirical analysis. J. Financ. Econ. 85, 66–101. Chhaochharia, V., Grinstein, Y., 2007. Corporate governance and firm value: the impact of the 2002 governance rules. J. Financ. 62 (4), 1789–1825.
Coates, JC, Srinivasan, S., 2014. Sarbanes - Oxley Act after Ten Years: A Multidisciplinary Review” (with John Coates), Accounting Horizons. 28 (3). Dahya, J., McConnell, JJ, 2007. Board composition, corporate
performance, and the Cadbury Committee recommendation. J. Financ. Bergalah. Anal 42 (3), 535–564. Dicks, DL, 2012. Executive compensation and the role for corporate governance regulation. Rev. Financ. Pejantan.
25 (6), 1971–2004. Duchin, R., Matsusaka, JG, Ozbas, O., 2010. When are outside directors effective? J. Financ. Econ. 96 (2), 195–214. Evans, JH, Nagarajan, N., Schloetzer, J., 2010. CEO turnover and retention light:
retaining former CEOs on the board. J. Akun. Res. 48 (5), 1015–1047. Faleye, O., Hoitash, R., Hoitash, U., 2011. The costs of intense board monitoring. J. Financ. Econ. 101 (1), 160–181. Fama, E., French, K., 1998.
Taxes, financing decisions, and firm value. J. Financ. 53, 819–843. Fich, E., Shivdasani, A., 2006. Are busy boards effective monitors? J. Financ. 61, 689–724. Germanova, R., Pierce, C., Richez-Baum, B., Armstrong, P.,
2015. A Guide to Corporate Governance Practices in the European Union. World Bank Group, Washington,
DC (http://documents.worldbank.org/curated/en/2015/06/24606853/guide-corporate-governance-practices-european-union). Gompers, P., Ishii, J., Metrick, A., 2003. Corporate governance and equity
prices. QJ Econ. 118, 107–155. Guo, L., Masulis, R., 2014. Board Structure and Monitoring: New Evidence from CEO Turnovers. working paper. University of New South Wales. Guthrie, K., Sokolowsky, J., Wan, K.-M.,
2012. CEO compensation and board structure revisited. J. Financ. 67 (3), 1149–1169. Hermalin, B., Weisbach, W., 1998. Endogenously chosen boards of directors and their monitoring of the CEO. Saya. Econ. Rev. 88,
96–118. Imbens, GW, 2014. Matching methods in practice: three examples. NBER working paper 19959. Imbens, GW, Rubin, DB, 2015. Causal Inference for Statistics, Social and Biomedical Sciences. Cambridge
University Press, Cambridge and New York (forthcoming). Larcker, DF, Richardson, S., Tuna, I., 2007. Corporate governance, accounting outcomes, and organizational performance. Account. Rev. 82 (4), 963–1008.
Larcker, DF, Ormazabal, G., Taylor, DJ, 2011. The market reaction to corporate governance regulation. J. Financ. Econ. 101 (2), 431–448. Leuz, C., 2007. Was the Sarbanes-Oxley Act of 2002 really this costly? A
discussion of evidence from event returns and going-private decisions. J. Akun. Econ. 49 (1–2),
146–165. Linck, Netter, Yang, 2009. The effects and unintended consequences of the Sarbanes-Oxley Act on the supply and demand for directors. Rev. Financ. Pejantan. 22 (8),
3287–3328. Morck, R., Shleifer, A., Vishny, R., 1988. Management ownership and market valuation: an empirical analysis. J. Financ. Econ. 20, 293–315. Narayanan, MP, Seyhun, HN, 2006. Effect of
Sarbanes Oxley Act on the Influencing of Executive Compensation. working paper. Universitas Michigan. Takeo, Y., 2015. Move to Improve Japanese Corporate Governance Devolves Into Compliance Game. (The Japan
Times. http://www.japantimes.co.jp/news/2015/11/
19/business/move-to-improve-japanese-corporate-governance-devolves-into-compliance-game/#.Vk5M4HarSM_).

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

Anda mungkin juga menyukai