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Governance Mechanisms and Equity Prices
Martijn Cremers,Vinay B. Nair +1 more
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In this paper, the authors investigate how the market for corporate control (external governance) and shareholder activism (internal governance) interact and show that the complementary relation exists for firms with lower industry-adjusted leverage and is stronger for smaller firms.Abstract:
We investigate how the market for corporate control (external governance) and shareholder activism (internal governance) interact. A portfolio that buys firms with the highest level of takeover vulnerability and shorts firms with the lowest level of takeover vulnerability generates an annualized abnormal return of 10 - 15% only when public pension fund (blockholder) ownership is high as well. A similar portfolio created to capture the importance of internal governance generates annualized abnormal returns of 8%, though only in the presence of high vulnerability to takeovers. Further, we show that the complementary relation exists for firms with lower industry-adjusted leverage and is stronger for smaller firms. The complementary relation is confirmed using accounting measures of profitability. Using data on acquisitions, firm level Q's and accounting performance, we explore possible interpretations, providing preliminary evidence for a risk effect as well.read more
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Corporate Governance and the Value of Cash Holdings
Amy K. Dittmar,Jan Mahrt-Smith +1 more
TL;DR: In this article, the authors investigate how corporate governance impacts firm value by examining both the value and the use of cash holdings in poorly and well governed firms, and show that firms with poor corporate governance dissipate cash quickly and in ways that significantly reduce operating performance.
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Investor Inattention and Friday Earnings Announcements
TL;DR: In this paper, the authors compare the response to earnings announcements on Friday, when investor inattention is more likely, to the response on other weekdays, and support explanations of post-earnings announcement drift based on underreaction to information caused by limited attention.
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Corporate Governance and Acquirer Returns
TL;DR: In this article, the authors examine whether corporate governance mechanisms, especially the market for corporate control, affect the profitability of firm acquisitions and find that acquirers with more anti-takeover provisions experience significantly lower announcement-period stock returns than other acquirers.
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Socially responsible investments: Institutional aspects, performance, and investor behavior
TL;DR: In this paper, the authors provide a critical review of the literature on socially responsible investments (SRI) and conclude that existing studies hint but do not unequivocally demonstrate that SRI investors are willing to accept suboptimal financial performance to pursue social or ethical objectives.
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Corporate Governance, Accounting Outcomes, and Organizational Performance
TL;DR: In this article, the authors examined the association between typical measures of corporate governance and various accounting and economic outcomes and found that these mixed results are partially attributable to the difficulty in generating reliable and valid measures for the complex construct that is termed corporate governance.
References
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Common risk factors in the returns on stocks and bonds
Eugene F. Fama,Kenneth R. French +1 more
TL;DR: In this article, the authors identify five common risk factors in the returns on stocks and bonds, including three stock-market factors: an overall market factor and factors related to firm size and book-to-market equity.
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Law and Finance
Rafael La Porta,Rafael La Porta,Florencio Lopez de Silanes,Florencio Lopez de Silanes,Andrei Shleifer,Andrei Shleifer,Robert W. Vishny,Robert W. Vishny +7 more
TL;DR: This paper examined legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries and found that common law countries generally have the best, and French civil law countries the worst, legal protections of investors.
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Risk, Return, and Equilibrium: Empirical Tests
Eugene F. Fama,James D. MacBeth +1 more
TL;DR: In this article, the relationship between average return and risk for New York Stock Exchange common stocks was tested using a two-parameter portfolio model and models of market equilibrium derived from the two parameter portfolio model.
Journal ArticleDOI
Law and Finance
TL;DR: In this article, the authors examined legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries and found that common-law countries generally have the strongest, and French civil law countries the weakest, legal protections of investors, with German- and Scandinavian-civil law countries located in the middle.
Posted Content
A Survey of Corporate Governance
TL;DR: The authors surveys research on corporate governance, with special attention to the importance of legal protection of investors and of ownership concentration in corporate governance systems around the world, and presents a survey of the literature.