Corporate Governance And Expected Stock Returns
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Author | : Andreas Schillhofer |
Publisher | : Springer-Verlag |
Total Pages | : 210 |
Release | : 2013-03-08 |
Genre | : Business & Economics |
ISBN | : 3322815609 |
Based on his Corporate Governance Rating (CGR) for German firms, Andreas Schillhofer documents a positive relationship between the CGR and firm value. In addition, there is strong evidence that expected returns are negatively correlated with the CGR if dividend yields and price-earnings ratios are used as proxies for the cost of capital.
Author | : Wolfgang Drobetz |
Publisher | : |
Total Pages | : 51 |
Release | : 2010 |
Genre | : |
ISBN | : |
Recent empirical work shows that a better legal environment leads to lower expected rates of return in an international cross-section of countries. This paper investigates whether differences in firm-specific corporate governance also help to explain expected returns in a cross-section of firms within a single jurisdiction. Constructing a corporate governance rating (CGR) for German firms, we document a positive relationship between the CGR and firm value. In addition, there is strong evidence that expected returns are negatively correlated with the CGR, if dividend yields and price-earnings ratios are used as proxies for the cost of capital. Most results are robust for endogeneity, with causation running from corporate governance practices to firm fundamentals. Finally, an investment strategy that bought high-CGR firms and shorted low-CGR firms would have earned abnormal returns of around 12 percent on an annual basis during the sample period. We rationalize the empirical evidence with lower agency costs and/or the removal of certain governance malfunctions for the high-CGR firms.
Author | : Wolfgang Drobetz |
Publisher | : |
Total Pages | : |
Release | : 2005 |
Genre | : |
ISBN | : |
Author | : Leora Klapper |
Publisher | : World Bank Publications |
Total Pages | : 60 |
Release | : 2004 |
Genre | : Business law |
ISBN | : |
"Using a comprehensive database of firms in Western and Eastern Europe, we study how the business environment in a country drives the creation of new firms. Our focus is on regulations governing entry. We find entry regulations hamper entry, especially in industries that naturally should have high entry. Also, value added per employee in naturally "high entry" industries grows more slowly in countries with onerous regulations on entry. Interestingly, regulatory entry barriers have no adverse effect on entry in corrupt countries, only in less corrupt ones. Taken together, the evidence suggests bureaucratic entry regulations are neither benign nor welfare improving. However, not all regulations inhibit entry. In particular, regulations that enhance the enforcement of intellectual property rights or those that lead to a better developed financial sector do lead to greater entry in industries that do more R & D or industries that need more external finance"--National Bureau of Economic Research web site.
Author | : Mathias Külpmann |
Publisher | : Springer Science & Business Media |
Total Pages | : 233 |
Release | : 2013-03-20 |
Genre | : Business & Economics |
ISBN | : 3540247653 |
Mathias Külpmann presents a framework to evaluate whether the stock market is in line with underlying fundamentals. The new and revised edition offers an up to date introduction to the controversy between rational asset pricing and behavioural finance. Empirical evidence of stock market overreaction are investigated within the paradigms of rational asset pricing and behavioural finance. Although this monograph will not promise the reader to become a millionaire, it offers a road to obtain a deeper understanding of the forces which drive stock returns. It should be of interest to anyone interested in what drives performance in the stock market.
Author | : Theodore Clark Moorman |
Publisher | : |
Total Pages | : |
Release | : 2005 |
Genre | : |
ISBN | : |
Extant literature finds that long-term abnormal stock returns are generated by a strategy based on corporate governance index values (Gompers, Ishii, and Metrick2003). The result is inconsistent with efficient markets and suggests that information about governance is not accurately reflected in market data. Control firm portfolios are used to mitigate model misspecification in measuring long-term abnormal returns. Using a number of different matching criteria and governance indices, no long-term abnormal returns are found to trading strategies based on corporate governance. The effect of a change in governance on firm value is mixed, but some support is found for poor governance destroying firm value. These results have a number of implications for practitioners, researchers, and policy makers.
Author | : Erica X. N. Li |
Publisher | : |
Total Pages | : 60 |
Release | : 2016 |
Genre | : |
ISBN | : |
I develop a dynamic model of corporate investment with taxes, costly equity and debt financing, agency conflicts between shareholders and managers, and a parameterized time-varying pricing kernel. The framework allows me to explore both the cross section of returns and firms' financing choices. In the model, managers seek private benefits proportional to the sizes of the firms, leading to empire-building behaviors. Corporate governance is modeled explicitly as a mechanism for shareholders to discipline managers. The predictions of the model are consistent with the recent empirical findings: (1) firms with stronger governance outperform firms with weaker governance in booms and underperform these firms in recessions; (2) firms with weaker governance enjoy lower costs of debt financing and rely less on equity financing than firms with stronger governance do. I also empirically test the predictions of the model on expected stock returns.
Author | : Luc Renneboog |
Publisher | : Emerald Group Publishing |
Total Pages | : 569 |
Release | : 2006-03-02 |
Genre | : Business & Economics |
ISBN | : 0444527230 |
Incorporates estimation risk in portfolio choice and also covers a risk measure for retail investment products, understanding and exploiting momentum in stock returns. This book includes: Introduction - Corporate restructuring; mergers and acquisitions in Europe; and the performance of acquisitive companies in the US.
Author | : Hoang N. Pham |
Publisher | : Routledge |
Total Pages | : 190 |
Release | : 2022-01-25 |
Genre | : Business & Economics |
ISBN | : 1000540278 |
The relationship between ownership structure and firm performance has been studied extensively in corporate finance and corporate governance literature. Nevertheless, the mediation (path) analysis to examine the issue can be adopted as a new approach to explain why and how ownership structure is related to firm performance and vice versa. This approach calls for full recognition of the roles of agency costs and corporate risk-taking as essential mediating variables in the bi-directional and mediated relationship between ownership structure and firm performance. Based on the agency theory, corporate risk management theory and accounting for the dynamic endogeneity in the ownership–performance relationship, this book develops two-mediator mediation models, including recursive and non-recursive mediation models, to investigate the ownership structure–firm performance relationship. It is demonstrated that agency costs and corporate risk-taking are the ‘missing links’ in the ownership structure–firm performance relationship. Hence, this book brings into attention the mediation and dynamic approach to this issue and enhances the knowledge of the mechanisms for improving firm’s financial performance. This book will be of interest to corporate finance, management and economics researchers and policy makers. Post-graduate research students in corporate governance and corporate finance will also find this book beneficial to the application of econometrics into multi-dimensional and complex issues of the firm, including ownership structure, agency problems, corporate risk management and financial performance.
Author | : |
Publisher | : |
Total Pages | : 52 |
Release | : 2008 |
Genre | : |
ISBN | : |