Corporate Governance and Equity Prices
- Tags:
- Business Operations,
- Shareholder,
- Sales Strategy,
- Sales,
- Knowledge@Wharton,
- Financial Accounting,
- Finance,
- Equity,
- Corporate Law,
- Corporate Governance,
- ...
- Source:
- Knowledge@Wharton
FREE Registration is required
Overview: In this paper, the incidence of 24 different provisions to build a "Governance Index" for about 1,500 firms are used and then it studies the relationship between this index and several forward-looking performance measures during the 1990s. It is found that a striking relationship between corporate governance and stock returns. An investment strategy that bought the firms in the lowest decile of the index (strongest shareholder rights) and sold the firms in the highest decile of the index (weakest shareholder right) would have earned abnormal returns of 8.5 percent per year during the sample period. Furthermore, the Governance Index is highly correlated with firm value. Finally, The authors find that weaker shareholder rights are associated with lower profits, lower sales growth, higher capital expenditures, and a higher amount of corporate acquisitions. The paper concludes with a discussion of several causal interpretations.
(Is this item miscategorized? Does it need more tags? Let us know.)
Format: PDF | Size: 229KB | Date: Jul 2001 | Pages: 72
People who downloaded this item also downloaded
 |
Accounting: Subtle Issues in Revenue Recognition |
