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Do Corporate Governance Mandates Impact Long-Term Firm Value and Governance Culture?

46 Pages Posted: 27 Jul 2016  

Reena Aggarwal

Georgetown University - Robert Emmett McDonough School of Business

Jason D. Schloetzer

Georgetown University - McDonough School of Business

Rohan Williamson

Georgetown University - McDonough School of Business

Date Written: July 25, 2016

Abstract

Motivated by recent changes to corporate governance standards around the world, we use a regulatory shock that substantially altered the governance structure for some firms to shed light on the long-term impact of mandates that are of global interest. Firms affected by this shock had lower values and non-mandated governance practices that were less shareholder friendly before the mandates were in effect when compared to unaffected matched peers. In the post-mandate period, we document a 48 percent tightening of the relative value gap, and show that this gap relates to the continued use of less shareholder friendly non-mandated governance practices. Our results suggest that governance mandates can tighten, but not eliminate, the value gap between poorly and well governed firms, and that firms affected by the shock continue to have less shareholder friendly governance cultures long after regulatory intervention.

Keywords: Corporate Governance; Firm Value; Corporate Culture; Governance Regulation

JEL Classification: G3, G32, G34, K22, L51

Suggested Citation

Aggarwal, Reena and Schloetzer, Jason D. and Williamson, Rohan, Do Corporate Governance Mandates Impact Long-Term Firm Value and Governance Culture? (July 25, 2016). Journal of Corporate Finance, Forthcoming; Georgetown McDonough School of Business Research Paper No. 2813650. Available at SSRN: https://ssrn.com/abstract=2813650

Reena Aggarwal

Georgetown University - Robert Emmett McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-3784 (Phone)
202-687-0798 (Fax)

HOME PAGE: http://explore.georgetown.edu/people/aggarwal/

Jason D. Schloetzer

Georgetown University - McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-2672 (Phone)

HOME PAGE: http://explore.georgetown.edu/people/jds99/?PageTemplateID=319

Rohan G. Williamson (Contact Author)

Georgetown University - McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States
202-687-2284 (Phone)
202-687-4031 (Fax)

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