TY  - UNPD
A1  - Drobetz, Wolfgang
A1  - Schillhofer, Andreas
A1  - Zimmermann, Heinz
T1  - Corporate governance and expected stock returns: evidence from Germany
T2  - Institut für Bankrecht (Frankfurt, Main): Arbeitspapiere ; Nr. 110
N2  - Recent empirical work shows that a better legal environment leads to lower expected rates of return in an international cross-section of countries. This paper investigates whether differences in firm-specific corporate governance also help to explain expected returns in a cross-section of firms within a single jurisdiction. Constructing a corporate governance rating (CGR) for German firms, we document a positive relationship between the CGR and firm value. In addition, there is strong evidence that expected returns are negatively correlated with the CGR, if dividend yields and price-earnings ratios are used as proxies for the cost of capital. Most results are robust for endogeneity, with causation running from corporate governance practices to firm fundamentals. Finally, an investment strategy that bought high-CGR firms and shorted low-CGR firms would have earned abnormal returns of around 12 percent on an annual basis during the sample period. We rationalize the empirical evidence with lower agency costs and/or the removal of certain governance malfunctions for the high-CGR firms.
T3  - Arbeitspapiere / Johann-Wolfgang-Goethe-Universität, Institut für Bankrecht - 110 
KW  - Corporate Governance
KW  - corporate governance
KW  - principal-agent theory
KW  - asset pricing
Y1  - 2003
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/4764
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30-7379
UR  - http://www.jura.uni-frankfurt.de/42780841/arbeitspapiere
PB  - Institut für Bankrecht
CY  - Frankfurt am Main
ER  -