Corporate governance, product-market competition, and stock returns: Evidence from the Korean market

This study examines the relationship among market competition, corporate governance, and stock returns in Korea, a representative emerging market. We find that the relation between product-market competition and a firm's stock return is insignificant, but that better corporate governance is associated with a lower adjusted stock return when market competition intensifies in more competitive industries; This relationship is not evident in less competitive industries. Thus, the effects of corporate governance on stock returns depend on market-competition levels. We offer important empirical evidence by showing that the effects of corporate governance and product-market competition on firms' stock returns can vary by country and market environment.