Erschienen in:ESADE Business School Research Paper ; No. 268
Umfang:
1 Online-Ressource (61 p)
Sprache:
Englisch
DOI:
10.2139/ssrn.2989446
Identifikator:
Entstehung:
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments May 1, 2017 erstellt
Beschreibung:
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