What Matters in Corporate Governance?

2008/11/27 by Lucian A. Bebchuk, Alma Cohen, Allen Ferrell · 3 citations
Business, Management and Accounting · Mathematics · #Accounting #Auditing, Earnings Management, Governance #Business #Charter #Corporate Finance and Governance #Corporate governance #Economics #Finance #Financial Reporting and Valuation Research #Index (typography) #Law #Mathematics #Political science #Shareholder #Statistics #Uncorrelated #Valuation (finance)

paper · doi:10.1093/rfs/hhn099

openalex publication_date 2008/11/27 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/05

Abstract

We investigate the relative importance of the twenty-four provisions followed by the Investor Responsibility Research Center (IRRC) and included in the Gompers, Ishii, and Metrick governance index (Gompers, Ishii, and Metrick 2003). We put forward an entrenchment index based on six provisions: staggered boards, limits to shareholder bylaw amendments, poison pills, golden parachutes, and supermajority requirements for mergers and charter amendments. We find that increases in the index level are monotonically associated with economically significant reductions in firm valuation as well as large negative abnormal returns during the 1990–2003 period. The other eighteen IRRC provisions not in our entrenchment index were uncorrelated with either reduced firm valuation or negative abnormal returns.

Citations

• Takeover Threats and Managerial Myopia
• Common risk factors in the returns on stocks and bonds
• A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity
• Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?
• Enjoying the Quiet Life? Corporate Governance and Managerial Preferences
• Law and Finance

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• Lender effects on gains from mergers and acquisitions
• Law and economics [wikipedia]

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