Does corporate governance matter after all? governance scores and the value of Canadian companies

Abstract

This study assesses the determinants of governance in the case of Canadian firms and examines the relationship between governance and firm value after the 2008 financial crisis. We estimate the effect of governance on stock return by using different econometric approaches. Our results show that large firms and firms with higher market-to-book value adopt better standards of governance. However, the results show a negative impact of governance on stock return. Therefore, providing important insights to policy makers that have recently proposed changes to the Canadian regulatory system. Our results show a lack of market enforcement, therefore, self-regulation is unlikely to be an effective mechanism for implementation of best practices of governance.