Thirty Years of Shareholder Rights and Stock Returns

Martijn Cremers

University of Notre Dame

Allen Ferrell

Harvard Law School; European Corporate Governance Institute (ECGI)

March 12, 2012

AFA 2013 San Diego Meetings Paper

This paper explores the robustness of the positive association between shareholder rights and abnormal stock returns (using the Fama-French-Cahart four factor model) and potential explanations thereof. Utilizing hand-collected shareholder rights data for the 1978-1989 period in conjunction with the existing post-1990 RiskMetrics data, we document that: (1) over the 1978-2007, the association is generally robust to a variety of controls and estimating abnormal returns at the portfolio or firm-level; (2) this association co-varies with merger and acquisition (M&A) waves; (3) while being acquired and making acquisitions are both strongly associated with abnormal stock returns, these effects do not explain the positive association; and (4) once the four factor model is supplemented with the Cremers, Nair & John (2009) takeover factor – which captures risk associated with time-varying investment opportunities and thus relates to the state of the M&A market – the association disappears.

Number of Pages in PDF File: 42

Keywords: G-Index, abnormal stock returns, robustness, takeover factor, shareholder rights

JEL Classification: G12, G34

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Date posted: March 13, 2012 ; Last revised: January 7, 2015

Suggested Citation

Cremers, Martijn and Ferrell, Allen, Thirty Years of Shareholder Rights and Stock Returns (March 12, 2012). AFA 2013 San Diego Meetings Paper. Available at SSRN: http://ssrn.com/abstract=2020471 or http://dx.doi.org/10.2139/ssrn.2020471

Contact Information

K. J. Martijn Cremers (Contact Author)
University of Notre Dame ( email )
P.O. Box 399
Notre Dame, IN 46556-0399
United States
Allen Ferrell
Harvard Law School ( email )
Griswold 303 1525 Massachusetts Avenue
Cambridge, MA 02138
United States
(617) 495-8961 (Phone)
(617) 495-1110 (Fax)
European Corporate Governance Institute (ECGI)
B-1050 Brussels
HOME PAGE: http://www.ecgi.org
Feedback to SSRN

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