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Corporate Governance, FAMILY OWNERSHIP AND FIRM VALUE

Blackwell Publishing Ltd.Oxford, UK
CORGCorporate Governance: An International Review0964-8410Blackwell Publishing Ltd. 2005
November 2005136769784
CORPORATE GOVERNANCE,
FAMILY OWNERSHIP AND FIRM VALUE: THE CANADIAN EVIDENCEPETER KLEIN, DANIEL SHAPIRO AND JEFFREY YOUNG
Corporate Governance, Family
Ownership and Firm Value:
the Canadian evidence
Peter Klein, Daniel Shapiro* and Jeffrey Young
We analyse the relationship between firm value, as measured by Tobin’s q, and newly releasedindices of effective corporate governance for a sample of 263 Canadian firms. The resultsindicate that corporate governance does matter in Canada. However, not all elements ofmeasured governance are important, and the effects of governance do differ by ownershipcategory. For the entire sample of firms we find no evidence that a total governance indexaffects firm performance. This is mainly because we find no evidence that boardindependence, the most heavily-weighted sub-index, has any positive effect on firmperformance. Indeed, for family-owned firms we find that the effect is negative. In general,
sub-indices measuring effective compensation, disclosure and shareholder rights practicesenhance performance and this is true for most ownership types. We also find no evidence thatgovernance practices are endogenous.
Keywords: Corporate governance, governance rankings, board of directors, family firms, firm
performance
Introduction
here has been increased public andacademic discussion of issues related tocorporate governance in most countries withactive capital markets. Both firms and regulatorsare considering how best to ensure goodcorporate governance. Oddly, however, thereis no overwhelming evidence to suggest thatwithin developed markets firm performance isenhanced by better governance practices. Noris there total agreement as to whether corporategovernance can be measured in a usefulway.

Acknowledgements
We are indebted to two anonymous referees
for constructive comments and suggestions.
This research is supported by a grant from the
Social Sciences and Humanities Research
Council of Canada.
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