DOES CORPORATE GOVERNANCE DISCLOSURE PLAY THE ROLE OF INFORMATION FEEDBACK IN KOREA?

[Purpose] Along with the trend toward emphasizing the importance of corporate governance, Korean government has adopted the voluntary disclosure system of corporate governance to all listed firms to enhance the transparency of corporate management and functions of monitoring since 2017. In such a context, we explore whether firms voluntarily disclose their corporate governance practices after stock price crash which is used as a proxy of decreasing firm value and reputation. [Result] Using 568 firm-year observations, we document that firms tend to deliver corporate governance information voluntarily after experiencing stock price crash. The result indicates two aspects. Information demand formed by stakeholders lead the possibility of corporate governance disclosure as well as the issuance of corporate governance disclosure offers firms have an opportunity to recover their credibility, reputation and firm value. [Implication] Our result suggests that corporate governance report play an important role of information feedback of capital market. In addition to a function of information feedback, our result provides the evidence that firms going through negative event or scandal may use corporate governance disclosure as a tool of recovering firm value and reputation.