Download or read book Corporate Governance and Equity Prices written by Stijn Claessens and published by World Bank Publications. This book was released on 1995 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Corporate Governance and Equity Prices written by Stijn Claessens and published by . This book was released on 2016 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Corporate Governance and Equity Prices written by Stijn Claessens and published by . This book was released on 1999 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: February 1995 More concentrated ownership is generally expected to improve corporate governance. Evidence from Czechoslovakia's mass privatization program supports this hypothesis. Equity prices in the Czech and Slovak Republics are higher when a domestic or foreign investor has majority firm ownership, and lower when ownership is shared among many investors. The 1992 Czechoslovakia mass privatization program involving about 1,500 enterprises and implemented through a voucher scheme with competitive bidding was a bold step in changing the ownership and governance of a large part of the economy. It represents a clear test case of one approach, and other countries may benefit from its lessons. At the time, much skepticism was voiced about mass privatization: it would lead to diffuse ownership, and no effective corporate governance would result. But innovative forces led to the emergence of investment funds that collected much of the individuals' voucher points, leading to a much more concentrated ownership structure. It has been expected that this concentrated ownership would lead to improved corporate governance. But the jury is still out. So far, only limited and largely anecdotal evidence is available on the impact investment funds have on the way firms are being managed. Too little time has passed and too many shocks have occurred (for example, the split of the Czech and Slovak Republics) to expect to find discernible changes in corporate governance on measures of actual firm performance. An alternative approach is to investigate whether firms that ended up with more concentrated ownership -- and possibly improved governance -- sell for higher prices, either in the last voucher round or in the secondary market since then. In a forward-looking financial market, one can expect prices to incorporate the effects of better ownership on future firm performance and associated dividends to shareholders. Put differently, one would expect that two firms with different shareholding structures, but otherwise identical, would trade at different prices -- with the firm with a more concentrated ownership, and presumably better corporate governance, trading at a higher price. On a cross-sectional basis, ownership structure may thus be significant in explaining (relative) share prices. Claessens explores this line of reasoning. Controlling for a number of firm and sector-specific variables, he finds that: * Majority ownership by a domestic or foreign investor has a positive influence on firm prices. * Firms with many small owners have lower prices. * Ownership by many small-scale investors makes it easier for any single investor to establish effective control, but such control does not necessarily translate into higher prices. Claessens provides two possible explanations of why higher prices appear to be associated only with majority ownership by a single investor: * The corporate legal framework and the difficulty in collecting proxy votes in the Czech and Slovak Republics may prevent a small investor from making the necessary changes in the way firms are managed, thus keeping prices low. * Commercial banks are both managers of investment funds and creditors of individual firms. Funds managers may face conflicts of interest and not be interested in increasing the value of equity alone but also the value of credits. This could explain why prices are relatively lower for those firms in which investment funds have effective control. This paper -- a product of the Private Sector and Finance Team, Technical Department, Europe and Central Asia, and Middle East and North Africa Regions -- is part of a larger effort in the Bank to study corporate governance in transition economies.

Download or read book Corporate Governance and Equity Prices written by Paul Alan Gompers and published by . This book was released on 2001 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: Corporate-governance provisions related to takeover defenses and shareholder rights vary substantially across firms. In this paper, we use the incidence of 24 different provisions to build a 'Governance Index' for about 1,500 firms per year, and then we study the relationship between this index and several forward-looking performance measures during the 1990s. We find a striking relationship between corporate governance and stock returns. An investment strategy that bought the firms in the lowest decile of the index (strongest shareholder rights) and sold the firms in the highest decile of the index (weakest shareholder rights) would have earned abnormal returns of 8.5 percent per year during the sample period. Furthermore, the Governance Index is highly correlated with firm value. In 1990, a one-point increase in the index is associated with a 2.4 percentage-point lower value for Tobin's Q. By 1999, this difference had increased significantly, with a one-point increase in the index associated with an 8.9 percentage-point lower value for Tobin's Q. Finally, we find that weaker shareholder rights are associated with lower profits, lower sales growth, higher capital expenditures, and a higher amount of corporate acquisitions. We conclude with a discussion of several causal interpretations

Download or read book Corporate Governance and Equity Prices written by Paul A. Gompers and published by . This book was released on 2009 with total page 67 pages. Available in PDF, EPUB and Kindle. Book excerpt: Shareholder rights vary across firms. Using the incidence of 24 unique governance rules, we construct a quot;Governance Indexquot; to proxy for the level of shareholder rights at about 1500 large firms during the 1990s. An investment strategy that bought firms in the lowest decile of the index (strongest rights) and sold firms 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 find that firms with stronger shareholder rights had higher firm value, higher profits, higher sales growth, lower capital expenditures, and made fewer corporate acquisitions.

Download or read book A Reexamination of Corporate Governance and Equity Prices written by Shane A. Johnson and published by . This book was released on 2011 with total page 78 pages. Available in PDF, EPUB and Kindle. Book excerpt: We reexamine long-term abnormal returns for portfolios sorted on governance characteristics. Firms with strong shareholder rights and firms with weak shareholder rights differ from the general population of firms and from each other in how they cluster across industries. Using tests that are well specified under this industry clustering, we find statistically zero long-term abnormal returns for portfolios sorted on governance. Our results have important implications for interpreting studies that link governance to firm value and stock returns, demonstrate the importance of the coarseness of industry definitions in financial research, and shed light on addressing statistical problems created by industry clustering in samples.

Download or read book Evolving Corporate Governance and Equity Prices written by Daniel Cheng and published by . This book was released on 2006 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: The U.S. corporate failures in 2001-2002 led to intensified and persisting public concern over corporate governance practices, increased shareholder activism, and new regulations. The 2002-2005 period serves as a rich ground for studying how firms' changes in governance practices relate to their performance. First, how corporate governance momentum, an aggregate measure of a firm's change in corporate governance quality through time, is related to stock returns is studied. Our empirical evidence indicates that firms gaining positive governance momentum outperform firms gaining negative governance momentum in stock returns, and the evidence is concentrated in large firms. Next, the interaction between governance momentum and equity mispricing is investigated. The empirical evidence that, for undervalued firms, gaining positive governance momentum shortens the time to correct equity mispricing is concentrated in relatively large firms. Furthermore the evidence that, for overvalued firms, gaining negative governance momentum shortens the time to correct equity mispricing is concentrated in relatively small firms. Our findings suggest that, for firms undervalued or overvalued by the market, pursuing or keeping the best corporate governance practices is particularly important in their quest to improve shareholder value.

Download or read book Corporate Governance Product Market Competition and Equity Prices written by Xavier Giroud and published by . This book was released on 2012 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the hypothesis that firms in competitive industries should benefit relatively less from good governance, while firms in non-competitive industries - where lack of competitive pressure fails to enforce discipline on managers - should benefit relatively more. Whether we look at the effects of governance on long-horizon stock returns, firm value, or operating performance, we consistently find the same pattern: The effect is monotonic in the degree of competition, it is small and insignificant in competitive industries, and it is large and significant in non-competitive industries. By implication, the effect of governance (in non-competitive industries) reported in this paper is stronger than what has been previously reported in Gompers, Ishii, and Metrick (2003, quot;SGIMquot;) and subsequent work, who document the average effect across all industries. For instance, GIM's hedge portfolio - provided it only includes firms in non-competitive industries - earns a monthly alpha of 1.47%, which is twice as large as the alpha reported in GIM. The alpha remains large and significant even if the sample period is extended until 2006. We also revisit the argument that investors in the 1990s anticipated the effect of governance, implying that the alpha earned by GIM's hedge portfolio is likely due to an omitted risk factor. We find that while investors were indeed not surprised on average, they underestimated the effect of governance in non-competitive industries, the very industries in which governance has a significant effect in the first place.

Download or read book Corporate Governance Product Market Competition and Equity Prices written by Xavier Giroud and published by . This book was released on 2008 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Merger Decisions written by Federal Deposit Insurance Corporation and published by . This book was released on with total page 196 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Corporate Governance Capital Structure Choice and Equity Prices written by Anders Ersbak Bang Nielsen and published by . This book was released on 2007 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the relationship between companies' choice of capital structure and their stock market returns from a corporate governance perspective. A portfolio buying low-levered, zero payout stocks and selling high-levered, zero payout stocks earned abnormal returns of 8.5% per year from Feb. 1964 to Jan. 2004 after controlling for the three Fama-French factors and momentum. Similar results arise for other portfolios with exposure to non-tight capital structures. Such structures are optimal for companies with high growth options and therefore high sensitivity to aggregate risk associated with correlation in the arrival of investment opportunities across companies. Consistent with this view, companies with less tight capital structures have higher rates of sales growth and returns which are positively correlated with the aggregate level of investment opportunities in the economy.

Download or read book Corporate Governance Value Creation and Growth The Bridge between Finance and Enterprise written by OECD and published by OECD Publishing. This book was released on 2012-08-20 with total page 91 pages. Available in PDF, EPUB and Kindle. Book excerpt: This publication examines the role of corporate governance arrangements in providing right incentives to contribute the value creation process within the private enterprises and the implications of the differences in ownership structures on corporate governance practices and frameworks.

Download or read book Corporate Governance Matters written by David Larcker and published by FT Press. This book was released on 2011-04-14 with total page 497 pages. Available in PDF, EPUB and Kindle. Book excerpt: Corporate Governance Matters gives corporate board members, officers, directors, and other stakeholders the full spectrum of knowledge they need to implement and sustain superior governance. Authored by two leading experts, this comprehensive reference thoroughly addresses every component of governance. The authors carefully synthesize current academic and professional research, summarizing what is known, what is unknown, and where the evidence remains inconclusive. Along the way, they illuminate many key topics overlooked in previous books on the subject. Coverage includes: International corporate governance. Compensation, equity ownership, incentives, and the labor market for CEOs. Optimal board structure, tradeoffs, and consequences. Governance, organizational strategy, business models, and risk management. Succession planning. Financial reporting and external audit. The market for corporate control. Roles of institutional and activist shareholders. Governance ratings. The authors offer models and frameworks demonstrating how the components of governance fit together, with concrete examples illustrating key points. Throughout, their balanced approach is focused strictly on two goals: to “get the story straight,” and to provide useful tools for making better, more informed decisions.

Download or read book Corporate Governance and Firm Valuation written by Lawrence D. Brown and published by . This book was released on 2014 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: Gompers et al. [Gompers, P., Ishii, J., Metrick, A., 2003. Corporate governance and equity prices. Quarterly Journal of Economics 118, 107-155] created G-Index, a summary measure of corporate governance based on 24 firm-specific provisions, and showed that more democratic firms are more valuable. Bebchuk et al. [Bebchuk, L., Cohen, A., Ferrell, A., 2005. What matters in corporate governance? Working Paper, Harvard Law School] created an entrenchment index based on six provisions underlying G-Index, and found it to fully drive the Gompers et al. (2003) valuation results. Both G-Index and the entrenchment index are based on IRRC data that is comprised of anti-takeover measures, focusing on external governance [Cremers, K.J.M., Nair, V.B., 2005. Governance mechanisms and equity prices. Journal of Finance 60, 2859-2894]. We create Gov-Score, a summary governance measure based on 51 firm-specific provisions representing both internal and external governance, and we show that a parsimonious index based on seven provisions underlying Gov-Score fully drives the relation between Gov-Score and firm value. Our results support the Bebchuk et al. (2005) findings that only a small subset of provisions marketed by corporate governance data providers are related to firm valuation, and the Cremers and Nair (2005) evidence that both internal and external governance are linked to firm value. The 51 governance provisions we consider include five that are relevant to accounting and public policy: stock option expensing, and four that are audit-related. We find none of these five measures to be related to firm valuation. We document that only one of the seven governance provisions important for firm valuation was mandated by either the Sarbanes-Oxley Act of 2002 or the three major US stock exchanges. We provide researchers with an alternative measure of governance to G-Index with three distinct advantages: (1) broader in scope of governance, (2) covers more firms, and (3) more dynamic, reflecting recent changes in the corporate governance environment.

Download or read book Corporate Governance and Responsible Investment in Private Equity written by Simon Witney and published by Cambridge University Press. This book was released on 2021-01-07 with total page 241 pages. Available in PDF, EPUB and Kindle. Book excerpt: Private equity-backed companies are ubiquitous and economically significant. Consequently, the corporate governance of these companies matters to all of us, and – not surprisingly – is coming under increasing scrutiny. Simon Witney, a practicing private equity lawyer, positions private equity portfolio companies within existing academic theory and examines the laws that apply to them in the UK. He analyses the actual governance frameworks that are put in place and identifies problems created by the legal rules – as well as the market's solutions to them. This book not only explains why these governance mechanisms are established, but also what they are expected to achieve. Witney suggests that private equity owners have both the incentives and the capability to focus on responsible investment practices. Good governance, he argues, is a critical success factor for the private equity industry.

Download or read book Intangible Assets Values Measures and Risks written by John R.M. Hand and published by OUP Oxford. This book was released on 2003-02-20 with total page 558 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Recurrent Crisis in Corporate Governance written by Paul W. MacAvoy and published by Stanford University Press. This book was released on 2004 with total page 196 pages. Available in PDF, EPUB and Kindle. Book excerpt: Taking a close look at American corporate governance, the authors show what is missing in today's corporate governance, and support a case for activating the board of directors to put new controls on management and take responsibility for the result.