Study Of The Relationship Between Corporate Governance And Firm Value

The purpose of this paper is to study the relationship between Corporate Governance and Corporate Value. We study the corporate governance from the perspective of Director of Board and Managers, while the corporate value will be evaluated via ROE. We learn from the Tsingtao Brewery that good corporate governance do contribute the increase of corporate value.We summarize the theory about corporate governance and corporate value, such as the principle of corporate governance and structure of corporate governance, the result of empirical study corporate governance from various perspectives, etc. Based on these theories, we study the corporate governance in Tsingtao Brewery. In this case, we analyze the status of corporate governance including the structure of share and actual holder, internal governance structure, the managing team and the characteristics of corporate governance in Tsingtao Brewery, aiming to find the good way to improve the corporate governance in Tsingtao Brewery. As a result, we found that Tsingtao Brewery do have some characteristics such as stable managing team, focus on innovation, effectiveness in market share growth, and stable growth of the company. All these tell us that Tsingtao do a good job in corporate governance with the obvious evidence of the continuous growth of ROE.In order to understand the relationship between corporate governance and corporate value, we conduct event study to understand the impact of event announcement on corporate value. We select three events occurred from Jan 1, 2000 to Dec 31,2008, for example, the strategic alliance with AB company, the Sponsorship for Beijing Olympics and the announcement of distribution of Dividend of 2007. The result of event study tell us that strategic alliance with AB company did significantly affect the increase of corporate value, and the announcement of sponsorship for Beijing Olympics had some negative impact on the corporate, while the other result also tell us that the investors had preference to the cash dividend.Finally, we summarize the good practices of corporate governance in Tsingtao Brewery and come up with the suggestions to improve the corporate governance from perspectives of Directors of Board and Managing Team respectively. The suggestions from perspective of Directors of Board are: Performance Measurement for Director of Board, the set of independent Nomination Committee, Options Incentive for Directors. The suggestion from perspectives of Managing Team includes: strength the internal control to minimize the operational and financial risk, cultivate or attract more talented employees and implement the lean management in the operation of the company. These suggestions, hopefully, will be the alternative to improvement the corporate governance for Tsingtao Brewery and other companies with similar backgrounds.