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Corporate Governance and its Effect on Firm Value and Stock Returns of Listed Companies on the Athens Stock Exchange

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  • Kanellos Toudas
  • Athanasios Bellas

Abstract

Recent researches have worked on the relationship between Corporate Governance and expected rates on return as well as historical returns. Firstly, we construct an Index of Corporate Governance (CGQL) that measures the quality implementation of Corporate Governance of the enlisted firms on the Athens Stock Exchange distinguishing the firms into Democracies and Dictatorships. An investment strategy that buys Democracies and shorts Dictatorships earns abnormal returns of around 18% annually during the sample period. In this paper we investigate if Corporate Governance matters in investors’ decisions. We try to observe if Corporate Governance is a proxy for firm valuation, a factor of creating and altering abnormal returns, or a risk factor, which can be a “substitute†for market risk (beta), using uni- and multi-variate analyses. The conclusions call into question the utility of Corporate Governance upon firm attractiveness.

Suggested Citation

  • Kanellos Toudas & Athanasios Bellas, 2014. "Corporate Governance and its Effect on Firm Value and Stock Returns of Listed Companies on the Athens Stock Exchange," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 58-80.
    • Handle: RePEc:ers:journl:v:xvii:y:2014:i:2:p:58-80
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    3. Peter J. Baldacchino & Chantelle Camilleri & Simon Grima & Frank H. Bezzina, 2017. "Assessing Incentive and Monitoring Schemes in the Corporate Governance of Maltese Co-operatives," European Research Studies Journal, European Research Studies Journal, vol. 0(3A), pages 177-195.
    4. Vicky Zampeta, 2015. "The Impact of Corporate Governance and the Cost of Capital in Shipping," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 8(2), pages 19-34, October.
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