Abstract

http://ssrn.com/abstract=810944
 
 

References (17)



 
 

Citations (38)



 


 



Governance Indices and Valuation Multiples: Which Causes Which?


Kenneth Lehn


University of Pittsburgh - Finance Group

Sukesh Patro


Northern Illinois University

Mengxin Zhao


University of Alberta - School of Business; University of Alberta - Department of Finance and Statistical Analysis; University of Alberta

May 1, 2007

Journal of Corporate Finance, Vol. 13, 2007

Abstract:     
Two recent papers document a significant relation between valuation multiples and governance indices during the 1990s. We test whether causation runs from governance to valuation or vice versa. We find that valuation multiples during the early 1980s, a period preceding the adoption of the provisions comprising the governance indices, are highly correlated with valuation multiples during the 1990s. After controlling for valuation multiples during 1980–1985, no significant relation exists between contemporaneous valuation multiples and governance indices during the 1990s. The results are consistent with the hypothesis that firms with low valuation multiples were more likely to adopt provisions comprising the governance indices, not that the adoption of these provisions depresses valuation multiples.

Number of Pages in PDF File: 32

Keywords: Governance, governance index, causality

JEL Classification: G30, G34

Accepted Paper Series


Download This Paper

Date posted: October 2, 2005 ; Last revised: January 27, 2013

Suggested Citation

Lehn, Kenneth and Patro, Sukesh and Zhao, Mengxin, Governance Indices and Valuation Multiples: Which Causes Which? (May 1, 2007). Journal of Corporate Finance, Vol. 13, 2007. Available at SSRN: http://ssrn.com/abstract=810944

Contact Information

Kenneth Lehn (Contact Author)
University of Pittsburgh - Finance Group ( email )
372 Mervis Hall
Pittsburgh, PA 15260
United States
412-648-2034 (Phone)
Sukesh Patro
Northern Illinois University ( email )
236F Barsema Hall
DeKalb, IL 60115
United States
8157531354 (Phone)
Mengxin Zhao
University of Alberta - School of Business ( email )
2-43 Business Building
Edmonton, Alberta T6G 2C7
Canada
University of Alberta - Department of Finance and Statistical Analysis ( email )
2-32C Business Building
Edmonton, Alberta T6G 2R6
Canada

University of Alberta ( email )
Rm 238, School of Business
University of Alberta
Edmonton, Alberta T6G2C6
Canada
7802481318 (Phone)
Feedback to SSRN


Paper statistics
Abstract Views: 2,756
Downloads: 914
Download Rank: 12,895
References:  17
Citations:  38

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.265 seconds