The Corporate Governance - Performance Puzzle: New Insights

61 Pages Posted: 20 Jan 2017 Last revised: 24 Sep 2018

See all articles by Ariadna Dumitrescu

Ariadna Dumitrescu

ESADE Business School

Mohammed Zakriya

IÉSEG School of Management; CNRS; Lille Economie Management (LEM) UMR 9221; University of Lille

Multiple version iconThere are 2 versions of this paper

Date Written: September 1, 2018


This paper presents the "nG (new Governance) Index", an unequal-weighted measure of corporate governance that dynamically captures the heterogeneity of its individual antitakeover components, as an alternative to the equal-weighted G-Index, E-Index, and Gov-Score proposed in the related literature. Our findings show that all antitakeover provisions do not equally influence firms' corporate governance quality, and our proposed nG-Index therefore traces the governance–performance relationship more persistently than an equal-weighted measure does. Further analysis reveals that an nG-Index based zero-investment hedge, going long on a poor governance portfolio and shorting the good governance one, would generate an abnormal return of over 1.33% per month, or about 16% per year. This hedge is completely opposite to the long good governance–short poor governance strategy suggested in prior literature. We posit that this hedge reversal indicates that, in recent years, investors underreact to good governance signals and/or seek compensation for the high riskiness associated with poorly governed firms.

Keywords: corporate governance, antitakeover provisions, defensive tactics, G-Index, E-Index

JEL Classification: G30, G32, G34

Suggested Citation

Dumitrescu, Ariadna and Zakriya, Mohammed, The Corporate Governance - Performance Puzzle: New Insights (September 1, 2018). 8th Conference on Financial Markets and Corporate Governance (FMCG) 2017, Available at SSRN: or

Ariadna Dumitrescu

ESADE Business School ( email )

Av. Pedralbes 60-62
Barcelona, 08034

Mohammed Zakriya (Contact Author)

IÉSEG School of Management ( email )

3 rue de la Digue
Lille, 59000

CNRS ( email )


Lille Economie Management (LEM) UMR 9221 ( email )


University of Lille ( email )

Cité Scientifique
Villeneuve-d'Ascq, 59650

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics