Abstract
This study uses time-series data to examine the relation between corporate governance and stock returns. Based on internationally accepted principles (OECD, 2004), we develop a corporate governance index (CGI) to measure the quality of corporate governance practices of listed companies in Hong Kong. We find a positive relation between CGI scores and one-year buy-and-hold returns. Furthermore, our findings suggest an asymmetric response to changes in the quality of corporate governance practices. Specifically, the magnitudes of the decline in stock returns when firms show deteriorating CGI scores are much larger than the magnitudes of return increases when firms show improving CGI scores. Results further suggest that stock returns are more reponsive to deteriorating rights of shareholders and improving disclosure and transparency more than to changes in other aspects of governance.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
