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

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  • O'Connor, Thomas
  • Kinsella, Stephen
  • O'Sullivan, Vincent

Abstract

We examine the interaction between the legal protection of investors, corporate governance, 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 that they do. Investors look beyond the seemingly weak country-level governance structures, and focus on corporate governance.

Suggested Citation

  • O'Connor, Thomas & Kinsella, Stephen & O'Sullivan, Vincent, 2014. "Legal protection of investors, corporate governance, and investable premia in emerging markets," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 426-439.
  • Handle: RePEc:eee:reveco:v:29:y:2014:i:c:p:426-439
    DOI: 10.1016/j.iref.2013.07.003
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    Cited by:

    1. Lee, Youkyoung & Cho, Myeonghyeon, 2016. "Does control-ownership disparity matter to foreign investors in Korea?," International Review of Economics & Finance, Elsevier, vol. 44(C), pages 219-231.

    More about this item

    Keywords

    Investability; Corporate governance; Tobin's q; Emerging markets;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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