A Reexamination of Corporate Governance and Equity Prices
AbstractWe reexamine long-term abnormal returns for portfolios sorted on governance characteristics. Firms with strong shareholder rights and firms with weak shareholder rights differ from the population of firms and from each other in how they cluster across industries. Using well-specified tests under this industry clustering, we find statistically zero long-term abnormal returns for portfolios sorted on governance. Our results have important implications for interpreting studies that link governance to firm value and stock returns, demonstrate the importance of the coarseness of industry definitions in financial research, and shed light on addressing statistical problems created by industry clustering in samples. The Author 2009. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: firstname.lastname@example.org., Oxford University Press.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Society for Financial Studies in its journal The Review of Financial Studies.
Volume (Year): 22 (2009)
Issue (Month): 11 (November)
Contact details of provider:
Postal: Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.
Web page: http://www.rfs.oupjournals.org/
More information through EDIRC
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Emilia Peni & Sami Vähämaa, 2012. "Did Good Corporate Governance Improve Bank Performance during the Financial Crisis?," Journal of Financial Services Research, Springer, vol. 41(1), pages 19-35, April.
- Campbell, T. Colin & Gallmeyer, Michael & Johnson, Shane A. & Rutherford, Jessica & Stanley, Brooke W., 2011. "CEO optimism and forced turnover," Journal of Financial Economics, Elsevier, vol. 101(3), pages 695-712, September.
- King, Tao-Hsien Dolly & Wen, Min-Ming, 2011. "Shareholder governance, bondholder governance, and managerial risk-taking," Journal of Banking & Finance, Elsevier, vol. 35(3), pages 512-531, March.
- Daines, Robert M. & Gow, Ian D. & Larcker, David F., 2010. "Rating the ratings: How good are commercial governance ratings?," Journal of Financial Economics, Elsevier, vol. 98(3), pages 439-461, December.
- Larcker, David F. & Ormazabal, Gaizka & Taylor, Daniel J., 2010. "The Market Reaction to Corporate Governance Regulation," Research Papers 2059, Stanford University, Graduate School of Business.
- Ruenzi, Stefan & Weigert, Florian, 2011. "Crash Sensitivity and the Cross-Section of Expected Stock Returns," Working Papers on Finance 1324, University of St. Gallen, School of Finance, revised Mar 2013.
- Humphery-Jenner, Mark L., 2012.
"Internal and external discipline following securities class actions,"
Journal of Financial Intermediation,
Elsevier, vol. 21(1), pages 151-179.
- Humphery-Jenner, M., 2011. "Internal and External Discipline Following Securities Class Actions," Discussion Paper 2011-044, Tilburg University, Center for Economic Research.
- Chen, Chen-Wen & Liu, Victor W., 2013. "Corporate governance under asymmetric information: Theory and evidence," Economic Modelling, Elsevier, vol. 33(C), pages 280-291.
- Fuenzalida, Darcy & Mongrut, Samuel & Arteaga, Jaime Raúl & Erausquin, Alexander, 2013. "Good corporate governance: Does it pay in Peru?," Journal of Business Research, Elsevier, vol. 66(10), pages 1759-1770.
- Chen, Dong, 2012. "Classified boards, the cost of debt, and firm performance," Journal of Banking & Finance, Elsevier, vol. 36(12), pages 3346-3365.
- Dutt, Tanuj & Humphery-Jenner, Mark, 2013. "Stock return volatility, operating performance and stock returns: International evidence on drivers of the ‘low volatility’ anomaly," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 999-1017.
- Larcker, David F. & Ormazabal, Gaizka & Taylor, Daniel J., 2011. "The market reaction to corporate governance regulation," Journal of Financial Economics, Elsevier, vol. 101(2), pages 431-448, August.
- Bruno Maria Parigi & Loriana Pelizzon & Ernst-Ludwig von Thadden, 2013. "Stock Market Returns, Corporate Governance and Capital Market Equilibrium," CESifo Working Paper Series 4496, CESifo Group Munich.
- Humphery-Jenner, Mark, 2012. "The impact of the EU takeover directive on takeover performance and empire building," Journal of Corporate Finance, Elsevier, vol. 18(2), pages 254-272.
- Bebchuk, Lucian A. & Cohen, Alma & Wang, Charles C.Y., 2013. "Learning and the disappearing association between governance and returns," Journal of Financial Economics, Elsevier, vol. 108(2), pages 323-348.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press) or (Christopher F. Baum).
If references are entirely missing, you can add them using this form.