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

Author

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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.

Suggested Citation

  • Thomas O'Connor & Stephen Kinsella & Vincent O’Sullivan, 2012. "Legal protection of investors, corporate governance, and investable premia in emerging markets," Economics, Finance and Accounting Department Working Paper Series n229-12.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  • Handle: RePEc:may:mayecw:n229-12.pdf
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    References listed on IDEAS

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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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