Is good corporate governance priced?
Is good corporate governance priced?
A new governance index is constructed, which forms the basis of a new governance valuation factor, defined as the product of the firm governance index and the country institutional quality. Using monthly returns of 6,274 blue chip firms from 53 MSCI World equity markets for 20 years, our tests of variants of the augmented-CAPM, show that a two factor CAPM augmented with a factor mimicking portfolio based on our new governance metric yields the highest explanatory power in multi-country samples. We argue that this is representative of the revealed preferences of insider controlling groups within firms towards expropriating minority outsiders.
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
12 December 2023
Hearn, Bruce
45dccea3-9631-4e5e-914c-385896674dc2
Hearn, Bruce
(2023)
Is good corporate governance priced?
Academy of International Business - Middle East & North Africa chapter: AIB MENA 2023, Rabat, Morocco, Rabat, Morocco.
12 - 15 Dec 2023.
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Abstract
A new governance index is constructed, which forms the basis of a new governance valuation factor, defined as the product of the firm governance index and the country institutional quality. Using monthly returns of 6,274 blue chip firms from 53 MSCI World equity markets for 20 years, our tests of variants of the augmented-CAPM, show that a two factor CAPM augmented with a factor mimicking portfolio based on our new governance metric yields the highest explanatory power in multi-country samples. We argue that this is representative of the revealed preferences of insider controlling groups within firms towards expropriating minority outsiders.
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Published date: 12 December 2023
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Academy of International Business - Middle East & North Africa chapter: AIB MENA 2023, Rabat, Morocco, Rabat, Morocco, 2023-12-12 - 2023-12-15
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Local EPrints ID: 509350
URI: http://eprints.soton.ac.uk/id/eprint/509350
PURE UUID: 82acabff-fdb0-4580-a4d5-7e14e1da9b94
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Date deposited: 19 Feb 2026 17:40
Last modified: 20 Feb 2026 02:56
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