Publications
Publications
- 2013
- Journal of Financial Economics
Learning and the Disappearing Association Between Governance and Returns
By: Lucian A. Bebchuk, Alma Cohen and Charles C.Y. Wang
Abstract
The correlation between governance indices and abnormal returns documented for 1990–1999 subsequently disappeared. The correlation and its disappearance are both due to market participants' gradually learning to appreciate the difference between good-governance and poor-governance firms. Consistent with learning, the correlation's disappearance was associated with increases in market participants' attention to governance; market participants and security analysts were, until the beginning of the 2000s but not subsequently, more positively surprised by the earning announcements of good-governance firms; and, although governance indices no longer generated abnormal returns during the 2000s, their negative association with firm value and operating performance persisted.
Keywords
Corporate Governance; Investment Return; Operations; Performance; Value; Learning; Business Earnings; Behavioral Finance
Citation
Bebchuk, Lucian A., Alma Cohen, and Charles C.Y. Wang. "Learning and the Disappearing Association Between Governance and Returns." Journal of Financial Economics 108, no. 2 (May 2013): 323–348.
About The Author
