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Corporate governance and equity prices (2003)
| Venue: | Quarterly Journal of Economics |
| Citations: | 378 - 3 self |
BibTeX
@ARTICLE{Gompers03corporategovernance,
author = {Paul Gompers and Joy Ishii and Andrew Metrick},
title = {Corporate governance and equity prices},
journal = {Quarterly Journal of Economics},
year = {2003},
pages = {107--155}
}
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Abstract
Shareholder rights vary across �rms. Using the incidence of 24 governance rules, we construct a “Governance Index ” to proxy for the level of shareholder rights at about 1500 large �rms during the 1990s. An investment strategy that bought �rms in the lowest decile of the index (strongest rights) and sold �rms in the highest decile of the index (weakest rights) would have earned abnormal returns of 8.5 percent per year during the sample period. We �nd that �rms with stronger shareholder rights had higher �rm value, higher pro�ts, higher sales growth, lower capital expenditures, and made fewer corporate acquisitions. I.
