Corporate Governance and Firm Performance in Korea
 
We investigate how firm performance is related to corporate governance in Korea. We find that the adoption of an audit committee itself does not significantly improve the level of firm performance. However, we find that there is positive relationship between the outside directors' activity level and firm profitability. This suggests that outside directors can play a role of reducing agency conflicts between management and external shareholders so that the profitability is positively with their activity. Furthermore, we also find that for the firms where audit committees are voluntarily adopted, increased activities by minority shareholders and higher ownership by foreign investors tend to affect the profitability positively. Overall, our results partially support the hypothesis that corporate governance and firm performance are positively related.

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