Corporate Governance and the Long-Run Performance of Firms Issuing Seasoned Equity: An Australian Study

43 Pages Posted: 16 Apr 2009 Last revised: 4 Jan 2010

See all articles by Philip R. Brown

Philip R. Brown

UWA Business School, M250; Financial Research Network (FIRN)

Michael Lee

affiliation not provided to SSRN

Sian A. Owen

UNSW Australia Business School, School of Banking and Finance; Financial Research Network (FIRN)

Terry S. Walter

University of Sydney; University of Technology, Sydney - School of Finance and Economics; Financial Research Network (FIRN)

Date Written: April 13, 2009

Abstract

Corporate governance has been propelled to the forefront of contemporary business thinking by a string of high profile corporate collapses and dramatic regulatory responses in both the United States and Australia. A particularly extensive body of research has emerged surrounding the relationship between corporate governance and firm performance. We provide the first in-depth examination of this issue in an Australian context, making use of our comprehensive self-constructed governance database. We take the novel approach of combining the governance literature with evidence surrounding the long-term underperformance of firms issuing seasoned equity. Thus, we examine whether good corporate governance mitigates post-issue underperformance. Utilising a broad sample of Australian seasoned equity offerings, we demonstrate that issuing firms underperform a variety of benchmarks over the long term, confirming similar findings in the existing literature. We also find evidence of a positive relationship between the quality of a firm’s corporate governance and its relative post-issue performance. Our findings are robust to a variety of estimation methods and econometric specifications, and have far-reaching implications for researchers, regulators, firms and investors alike.

Keywords: Corporate governance, seasoned equity issue, long-run underperformance

JEL Classification: G14, G32

Suggested Citation

Brown, Philip R. and Lee, Michael and Owen, Sian A. and Walter, Terry Stirling, Corporate Governance and the Long-Run Performance of Firms Issuing Seasoned Equity: An Australian Study (April 13, 2009). 22nd Australasian Finance and Banking Conference 2009. Available at SSRN: https://ssrn.com/abstract=1378485 or http://dx.doi.org/10.2139/ssrn.1378485

Philip R. Brown

UWA Business School, M250 ( email )

Crawley, Western Australia 6009
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Michael Lee

affiliation not provided to SSRN ( email )

Sian A. Owen

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Terry Stirling Walter (Contact Author)

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

University of Technology, Sydney - School of Finance and Economics ( email )

Haymarket
Sydney, NSW 2007
Australia
+61 2 9514 3860 (Phone)
+61 2 9514 7711 (Fax)

HOME PAGE: http://datasearch.uts.edu.au/business/finance/staff/StaffDetails.cfm?UnitStaffId=5373

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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