Governance Indices and Valuation Multiples: Which Causes Which?
Gompers, Ishii, and Metrick (2003) and Bebchuk, Cohen, and Ferrell (2004) document that valuation multiples during the 1990s are significantly related to governance indices purporting to measure the quality of a firm’s governance structure. The results are consistent with two hypotheses: (i) governance affects valuation multiples and (ii) valuation multiples affect governance. We find evidence consistent with the latter explanation. Specifically, we find that (i) valuation multiples during the early 1980s, a period preceding the adoption of the provisions comprising the governance indices, are highly correlated with valuation multiples during the 1990s, (ii) valuation multiples during the early 1980s are significantly related to governance indices during the 1990s, and (iii) after controlling for valuation multiples during 1980-1985, no significant relation exists between contemporaneous valuation multiples and governance indices during the 1990s. The results support the hypothesis that causation runs from valuation multiples to governance, not vice versa.
Governance governance index causality
Kenneth Lehn Sukesh Patro Mengxin Zhao
Katz Graduate School of Business, University of Pittsburgh, Pittsburgh PA 15260 College of Business Administration, Kansas State University, Manhattan, KS, 66502 McCallum Graduate School of Business, Bentley College, Waltham, MA, 02452
国际会议
昆明
英文
1-26
2005-07-05（万方平台首次上网日期，不代表论文的发表时间）