The Corporate Governance – Performance Puzzle: New Insights

61 Pages Posted: 20 Jun 2017

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: May 1, 2017


This paper provides new insights on governance – performance relationship using recent data (2007 to 2015) on anti-takeover provisions’ incidence in sample firms. We present “nG (new Governance) Index”, an unequal weighted measure of corporate governance that captures the heterogeneity of its individual anti-takeover components, as an alternative to equal weighted G-Index, E-Index and Gov-Score proposed in the related literature. Our findings show that all provisions do not equally influence firms’ corporate governance quality and therefore, our proposed nG-Index traces governance – performance relationship more persistently than an equal-weighted measure. Further analysis reveals that an nG-Index based zero-investment hedge, going long on poor governance portfolio and shorting the good governance one, would have generated 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 such hedge reversal is an indication that, in recent years, investors underreact to good governance signals and/or seek compensation for high riskiness associated with poorly governed firms.

Keywords: Corporate Governance, Anti-Takeover 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 (May 1, 2017). ESADE Business School Research Paper No. 268, Available at SSRN: or

Ariadna Dumitrescu (Contact Author)

ESADE Business School ( email )

Av. Pedralbes 60-62
Barcelona, 08034

Mohammed Zakriya

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