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Legal protection of investors, corporate governance, and investable premia in emerging markets

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  • Thomas O'Connor

    ()
    (Department of Economics Finance and Accounting, National University of Ireland, Maynooth)

  • Stephen Kinsella

    ()
    (Department of Economics, Kemmy Business SchoolUniversity of Limerick,Limerick,Ireland.)

  • Vincent O’Sullivan

    ()
    (Department of Economics, Kemmy Business SchoolUniversity of Limerick,Limerick,Ireland.)

Abstract

We examine the interaction between the legal protection of investors, corporate governance within firms, institutional development between countries, and investable premia in emerging markets. In a multi country setting and using a novel dataset we find that better-governed firms experience significantly greater stock price increases upon equity market liberalization. We look to see whether well-governed firms in poorly governed countries enjoy an investability premium as measured by Tobin’s q. We find they do. Investors look beyond the seemingly weak country-level governance structures, and focus on corporate governance.

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Bibliographic Info

Paper provided by Department of Economics, Finance and Accounting, National University of Ireland - Maynooth in its series Economics, Finance and Accounting Department Working Paper Series with number n229-12.pdf.

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Length: 34 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:may:mayecw:n229-12.pdf

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Postal: Maynooth, Co. Kildare
Phone: 353-1-7083728
Fax: 353-1-7083934
Web page: http://economics.nuim.ie
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Keywords: Investability; Corporate Governance; Tobin’s q; Emerging Markets.;

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