Legal Protection of Investors, Corporate Governance, and Investable Premia in Emerging Markets
34 Pages Posted: 16 Jan 2012
Date Written: January 15, 2012
We examine the interaction between the legal protection of investors, corporate governance within firms, institutional development between countries, and investable premia in emerging markets. In a multi country setting and using a novel dataset we find that better-governed firms experience significantly greater stock price increases upon equity market liberalization. We look to see whether well-governed firms in poorly governed countries enjoy an investability premium as measured by Tobin’s q. We find they do. Investors look beyond the seemingly weak country-level governance structures, and focus on corporate governance.
Keywords: Investability, Corporate Governance, Tobin’s q, Emerging Markets
JEL Classification: G15, G30, G34
Suggested Citation: Suggested Citation