Abstract
In this paper, we discuss how corporate governance affects a transport firm's value. We derivate the optimal firm value Q* and compute the observed Q value; we then explain the shortfall (Q*-Q). To our knowledge, this is the first study that explains the distortion on transport firm value by internal governance mechanisms. Departing from 64 public road transport operators from 18 countries publicly traded during 2000-2011 using a parametric method, we empirically demonstrate that size of the board, board independence, CEO duality and CEO ownership can largely explain the distortion on transport firm value. The paper also provides an optimal corporate governance structure that can avoid such distortions.