Download Corporate Governance and Expected Stock Returns: Empirical by Andreas Schillhofer PDF

By Andreas Schillhofer

In the wake of a number of excessive profile company collapses the dialogue approximately company governance has intensified traders became extra aware of their rights of keep an eye on within the portfolio businesses. while Anglo-American authors have performed very good paintings at the dating among company governance and enterprise valuation, there's little empirical proof in this subject in Germany. yet fresh works recommend stricter criminal setting results in decrease anticipated premiums of go back in a global cross-section of countries.

Andreas Schillhofer investigates no matter if modifications in firm-specific company governance additionally aid to provide an explanation for anticipated returns in a cross-section of enterprises inside a unmarried jurisdiction. in line with his company Governance score (CGR) for German organisations, the writer files a good dating among the CGR and company worth. furthermore, there's robust proof that anticipated returns are negatively correlated with the CGR if dividend yields and price-earnings ratios are used as proxies for the price of capital.

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152; Witt (2002). p. 41. 39 However. the discussion and empirical findings on incentive contracts/management ownership goes back to BerlelMeans (1932). 40 See ShleiferNishny (1997). p. 737 . • , See La Porta/lopez-de-SiianeS/ShleiferNishny (2000b). p. 4. 13 Shareholder Value Approach. The central objective is to construct rules and incentives to effectively align the interests of managers and shareholders. In Western Europe, the scope of Corporate Governance is not as narrowly focused on financial returns and shareholder interests as in the Anglo-Saxon world.

293-295. 10 risk averse than diversified shareholders. In practice, this problem is further aggravated by high levels of fixed relative to total compensation. 28 The problem of time preference states that managers, whose employment is temporally restricted, might neglect long-term growth opportunities. 29 The problem of over-investment arises when managers opportunistically exploit their discretionary leeway to maximize firm size (empire building) by investing in low or negative net present value projects, instead of distributing excess cash to shareholders.

49; Lang/Lundholm (1996), p. 490; AchleitnerlBassen (2001a), pp. 12-13. 141 See PriceWaterhouseCoopers (2001). 35 In summary, in order for investors to exercise their ownership and voting rights, they must have the information available to them in a comprehensive and timely manner. While there is no study investigating whether the scope and effectiveness of transparency and disclosure standards are associated with a firm's valuation or required rates of return, it is intuitive that firms taking the initiative to improve the standards will mitigate hidden information and hence have a competitive edge over their peers that do not.

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