Corporate Governance, Ownership and Stock Price during Financial Crisis

The financial crisis in the third quarter of 2008 devastated the global financial markets. This crisis has aroused great concern over the effectiveness of corporate governance mechanism to safeguard investor interests. This study examines the impact of the independence of the Board of Directors and share ownership structure on the market performance of 976 Hong Kong-listed companies during the period of 2008 to 2009. The results indicate that during this period of financial crisis, firms that do not have an independent outside director acting as the Chair of the Board and firms that have a smaller proportion of outside independent directors have better stock performance measured by market-adjusted cumulative stock return. Managerial ownership represented by proportion of shares held by CEO and directors as well as proportion of substantial shareholdings demonstrates a negative association with market-adjusted cumulative stock return. When focused on director ownership of shares in the audit committee, results in this study indicate a positive association between proportion of shares owned by independent directors and market-adjusted cumulative stock return.