이사의 손해배상책임 감경규정 도입의 효과

Abstract

This paper investigates the effect of adoption of the Liability Limitation Provisions(LLP) on managerial behavior and future firm performance, and studies what role the corporate governance plays in this context. Our findings are summarized as follows. First, we document that LLP adopters spend more R&D expenditures, have higher idiosyncratic risk, and have greater volatility in operating performance than non-LLP adopters. Second, there is no significant difference in firm performance between LLP adopters and non-LLP adopters. This implies although LLP adoption lets managers take more risk, it does not immediately lead to better performance due to certain offsetting factors. Third, however, when an analysis is conducted on subsamples divided based on the effectiveness of corporate governance, we find that LLP adopters exhibit better operating performance than non-LLP adopters in a subsample of firms with good governance. This suggests the better the governance structure, the more effectively the negative effects of LLP are suppressed and the better the positive effects of LLP are manifested. Overall, this study shows that LLP adoption can promote bold managerial behavior, and lead to better firm performance, especially in firms with good governance. The findings of this study provide empirical support to justify the LLP in Korea.