Corporate Governance and Stock Returns in Asia

36 Pages Posted: 18 Apr 2012 Last revised: 15 Nov 2012

See all articles by Roy Kouwenberg

Roy Kouwenberg

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Mahidol University - College of Management; Erasmus University Rotterdam (EUR)

Roelof Salomons

University of Groningen

Pipat Thontirawong

Mahidol University - College of Management

Date Written: April 16, 2012

Abstract

Despite years of study, the impact of firm-level governance on stock returns is not clear, especially in non-U.S. markets. We investigate the returns of governance-based trading strategies in Asia, using bias-free return data and CLSA governance ratings. We argue that poor governance should be associated with higher market risk. We find that a portfolio of poorly governed firms has a higher market beta, higher expected return and higher realized return, compared to a good governance portfolio. In contrast to some earlier studies, we find no abnormal returns after adjusting for risk and country effects. Only investors who can predict in advance which firms will improve their governance can earn abnormal returns.

Keywords: corporate governance, stock market efficiency, emerging markets

JEL Classification: G3, G15

Suggested Citation

Kouwenberg, Roy R. P. and Kouwenberg, Roy R. P. and Salomons, Roelof and Thontirawong, Pipat, Corporate Governance and Stock Returns in Asia (April 16, 2012). Available at SSRN: https://ssrn.com/abstract=2041127 or http://dx.doi.org/10.2139/ssrn.2041127

Roy R. P. Kouwenberg (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Mahidol University - College of Management ( email )

69 Vipawadee Rangsit Road
Bangkok, 10400
Thailand

HOME PAGE: http://https://www.cm.mahidol.ac.th/web/index.php/18-faculty/148-roy-kouwenberg-ph-d-cfa

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Roelof Salomons

University of Groningen ( email )

Nettelbosje 2
Groningen, 9747 AE
Netherlands

HOME PAGE: http://www.rug.nl/staff/r.m.salomons/index

Pipat Thontirawong

Mahidol University - College of Management ( email )

999 Phuttamonthon 4 Road
Samsennai, Phayathai District
Salaya, Nakhon Pathom, Bangkok 73170
Thailand

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