Governance Mechanisms and Equity Prices

  title={Governance Mechanisms and Equity Prices},
  author={M. Cremers and Vinay B. Nair},
  • M. Cremers, Vinay B. Nair
  • Published 2005
  • Economics
  • We investigate how the market for corporate control (external governance) and shareholder activism (internal governance) interact. A portfolio that buys firms with the highest level of takeover vulnerability and shorts firms with the lowest level of takeover vulnerability generates an annualized abnormal return of 10 - 15% only when public pension fund (blockholder) ownership is high as well. A similar portfolio created to capture the importance of internal governance generates annualized… CONTINUE READING
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