77 Pages Posted: 28 Sep 2004
Date Written: May 2005
We examine the relation between a broad set of corporate governance indicators and various measures of managerial decision making and organizational performance. Using a sample of 2,106 firms, we distill 39 structural measures of corporate governance (e.g., board characteristics, stock ownership, institutional ownership, activist stock ownership, existence of debt-holders, mix of executive compensation, and anti-takeover variables) into 14 governance constructs using principal components analysis. We find that these 14 constructs are related to operating performance, have a somewhat mixed association with abnormal accruals, Tobin's Q, and excess stock returns, and little relation to class action lawsuits and accounting restatements.
Keywords: Corporate governance
JEL Classification: G34, M41, M43, M49, G32
Suggested Citation: Suggested Citation
Larcker, David F. and Richardson, Scott A. and Tuna, A. Irem, How Important is Corporate Governance? (May 2005). Available at SSRN: https://ssrn.com/abstract=595821 or http://dx.doi.org/10.2139/ssrn.595821