We focus on the relations among inside ownership, board composition, unaffiliated block ownership, and compensation structure for a sample of firms following their IPOs. Specifically, we follow firms for up to eleven years after their IPOs and examine the full sample and subsamples of firms that survive, are acquired, or that file for bankruptcy during the sample period. We find that as CEO ownership declines, board independence, board seats held by venture capitalists, and unaffiliated block ownership increase. Our findings suggest that as inside ownership decreases alternative governance mechanisms evolve to help mitigate the resulting increase in agency costs. Interestingly, the associations between CEO ownership, the fraction of venture capital board membership, and unaffiliated block ownership exist only for firms that survive over the eleven-year sample period.

This paper contributes to a new literature on the factors that affect firms' corporate governance practices. We find that regulatory factors are highly important, largely because Korean rules impose special governance requirements on large firms (assets extgreater2 trillion won). Industry factors, firm size, and firm risk are also important. Other firm-specific factors only modestly affect governance even when they are statistically significant. This suggests that many Korean firms do not choose their governance to maximize share price. Among firm-specific factors, the most significant are size (larger firms are better governed) and firm risk (riskier firms are better governed). Long-term averages of profitability and equity finance need are significant, where short-term averages are not. This is consistent with “sticky governance”, in which firms alter their governance slowly in response to economic factors.