Corporate Governance and Firm Valuation

ArXiv ID: ssrn-754484 “View on arXiv”

Authors: Unknown

Abstract

Gompers et al. [“Gompers, P., Ishii, J., Metrick, A., 2003. Corporate governance and equity prices. Quarterly Journal of Economics 118, 107-155”] created G-Index,

Keywords: Corporate Governance, G-Index, Shareholder Rights, Equity Valuation, Antitakeover Provisions, Equities

Complexity vs Empirical Score

• Math Complexity: 2.5/10
• Empirical Rigor: 8.5/10
• Quadrant: Street Traders
• Why: The paper uses standard regression models and index construction without advanced mathematics, but is heavily data-driven with comprehensive datasets (Compustat, ISS), large sample sizes (2538 firms), and detailed backtesting of governance indices against firm valuation metrics like Tobin’s Q.

  flowchart TD
    A["Research Goal: Does stronger<br>shareholder rights affect firm valuation?"] --> B["Data Source: Institutional Shareholder Services"]
    B --> C{"Key Methodology"}
    C --> D["Construct G-Index<br>from 24 antitakeover provisions"]
    C --> E["Collect firm financials &<br>equity prices 1990-1999"]
    D --> F["Regression Analysis: Tobin's Q"]
    E --> F
    F --> G["Key Finding: Firms with<br>stronger shareholder rights<br>have higher valuations"]