@article{bc0e9393cc9242909d86a8d95c2ffbdb,
title = "Governance, information flow, and stock returns",
abstract = "We analyze the evolution of governance-returns relationship in the last three decades and show that poor governance stocks outperform good governance ones after 2008. Previously, good governance stocks outperformed poor governance ones before this relationship disappeared in 2001. The novel reversal and reappearance of the relationship in 2008 can be explained by sophisticated investors learning to recognize governance risks and becoming more prudent after the global financial crisis. Our results show that investors could have identified via price and risk channels that the poorly governed firms face higher uncertainty regarding their future earnings power after 2008. Furthermore, following the crisis, we observe that institutional investors update their governance preferences through information-induced learning.",
keywords = "Anti-takeover provisions, Corporate governance, E-Index, Institutional investors, Learning",
author = "A. Dumitrescu and Mohammed Zakriya",
note = "Funding Information: We thank Tracy Wang (the editor) and an anonymous referee, as well as Vicente Bermejo, Menna El Hefnawy, Javier Gil-Bazo, Ioana Schiopu, Markus Schmid, Grzegorz Trojanowski, and the conference and seminar participants at the 2019 FMA Annual Meeting, 2019 Corporate Finance Day, 2019 FMA European Conference, Financial Management and Accounting Research Conference 2019, EFMA 2018 “Merton H Miller” Doctoral Seminar, and ESADE Business School for their comments and suggestions. We appreciate the financial support from the Government of Spain (grants PR2015-00645 and FEDER/MICIU-AEI/PGC2018-098670-B-100 ), the Government of Catalonia (grants 2014-SGR-1079 , 2017-SGR-640 , 2017-FI_B-00502 , 2018-FI_B-00170 and 2019-FI_B2-00163 ), Banco Sabadell , and La Caixa Foundation . Funding Information: We thank Tracy Wang (the editor) and an anonymous referee, as well as Vicente Bermejo, Menna El Hefnawy, Javier Gil-Bazo, Ioana Schiopu, Markus Schmid, Grzegorz Trojanowski, and the conference and seminar participants at the 2019 FMA Annual Meeting, 2019 Corporate Finance Day, 2019 FMA European Conference, Financial Management and Accounting Research Conference 2019, EFMA 2018 “Merton H Miller” Doctoral Seminar, and ESADE Business School for their comments and suggestions. We appreciate the financial support from the Government of Spain (grants PR2015-00645 and FEDER/MICIU-AEI/PGC2018-098670-B-100), the Government of Catalonia (grants 2014-SGR-1079, 2017-SGR-640, 2017-FI_B-00502, 2018-FI_B-00170 and 2019-FI_B2-00163), Banco Sabadell, and La Caixa Foundation. Publisher Copyright: {\textcopyright} 2022 Elsevier B.V.",
year = "2022",
month = feb,
doi = "10.1016/j.jcorpfin.2022.102168",
language = "English",
volume = "72",
journal = "Journal of Corporate Finance",
issn = "0929-1199",
publisher = "Elsevier B.V.",
}
