Governance, Information Flow, and Stock Returns

65 Pages Posted: 1 May 2018 Last revised: 19 Apr 2022

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

Date Written: November 12, 2021


We analyze the evolution of governance-returns relationship in the last three decades and show that poor governance stocks outperform good governance ones after 2008. Previously, good governance stocks outperformed poor governance ones before this relationship disappeared in 2001. The novel reversal and reappearance of the relationship in 2008 can be explained by sophisticated investors learning to recognize governance risks and becoming more prudent after the global financial crisis. Our results show that investors could have identified via price and risk channels that the poorly governed firms face higher uncertainty regarding their future earnings power after 2008. Furthermore, following the crisis, we observe that institutional investors update their governance preferences through information-induced learning.

Keywords: Learning, corporate governance, antitakeover provisions, Institutional investors, E-Index

JEL Classification: G14, G30, G34

Suggested Citation

Dumitrescu, Ariadna and Zakriya, Mohammed, Governance, Information Flow, and Stock Returns (November 12, 2021). Journal of Corporate Finance, Vol. 72, No. 102168, 2022, 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

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