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http://ssrn.com/abstract=278920
 
 

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Corporate Governance and Equity Prices


Paul A. Gompers


Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Joy L. Ishii


Stanford Graduate School of Business

Andrew Metrick


Yale School of Management; National Bureau of Economic Research (NBER)


Quarterly Journal of Economics, Vol. 118, No. 1, pp. 107-155, February 2003

Abstract:     
Shareholder rights vary across firms. Using the incidence of 24 unique governance rules, we construct a "Governance Index" to proxy for the level of shareholder rights at about 1500 large firms during the 1990s. An investment strategy that bought firms in the lowest decile of the index (strongest rights) and sold firms in the highest decile of the index (weakest rights) would have earned abnormal returns of 8.5 percent per year during the sample period. We find that firms with stronger shareholder rights had higher firm value, higher profits, higher sales growth, lower capital expenditures, and made fewer corporate acquisitions.

Number of Pages in PDF File: 67

Keywords: Corporate governance, shareholder rights, investor protection, agency problems, entrenched management, hostile takeovers, poison pills, golden parachutes, greenmail

JEL Classification: G34, G14

working papers series





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Date posted: September 12, 2001  

Suggested Citation

Gompers, Paul A. and Ishii, Joy L. and Metrick, Andrew, Corporate Governance and Equity Prices. Quarterly Journal of Economics, Vol. 118, No. 1, pp. 107-155, February 2003. Available at SSRN: http://ssrn.com/abstract=278920 or http://dx.doi.org/10.2139/ssrn.278920

Contact Information

Paul A. Gompers
Harvard Business School - Finance Unit ( email )
Boston, MA 02163
United States
617-495-6297 (Phone)
617-496-8443 (Fax)
Harvard University - Entrepreneurial Management Unit ( email )
Cambridge, MA 02163
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Joy L. Ishii
Stanford Graduate School of Business ( email )
518 Memorial Way
Stanford, CA 94305-5015
United States

Andrew Metrick (Contact Author)
Yale School of Management ( email )
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
(203)-432-3069 (Phone)
HOME PAGE: http://mba.yale.edu/faculty/profiles/metrick.shtml

National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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