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Thirty Years of Shareholder Rights and Stock Returns

42 Pages Posted: 13 Mar 2012 Last revised: 7 Jan 2015

Martijn Cremers

University of Notre Dame

Allen Ferrell

Harvard Law School; European Corporate Governance Institute (ECGI)

Date Written: March 12, 2012


This paper explores the robustness of the positive association between shareholder rights and abnormal stock returns (using the Fama-French-Cahart four factor model) and potential explanations thereof. Utilizing hand-collected shareholder rights data for the 1978-1989 period in conjunction with the existing post-1990 RiskMetrics data, we document that: (1) over the 1978-2007, the association is generally robust to a variety of controls and estimating abnormal returns at the portfolio or firm-level; (2) this association co-varies with merger and acquisition (M&A) waves; (3) while being acquired and making acquisitions are both strongly associated with abnormal stock returns, these effects do not explain the positive association; and (4) once the four factor model is supplemented with the Cremers, Nair & John (2009) takeover factor – which captures risk associated with time-varying investment opportunities and thus relates to the state of the M&A market – the association disappears.

Keywords: G-Index, abnormal stock returns, robustness, takeover factor, shareholder rights

JEL Classification: G12, G34

Suggested Citation

Cremers, Martijn and Ferrell, Allen, Thirty Years of Shareholder Rights and Stock Returns (March 12, 2012). AFA 2013 San Diego Meetings Paper. Available at SSRN: or

K. J. Martijn Cremers (Contact Author)

University of Notre Dame ( email )

P.O. Box 399
Notre Dame, IN 46556-0399
United States

Allen Ferrell

Harvard Law School ( email )

Griswold 303 1525 Massachusetts Avenue
Cambridge, MA 02138
United States
(617) 495-8961 (Phone)
(617) 495-1110 (Fax)

European Corporate Governance Institute (ECGI)

B-1050 Brussels


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