IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/6414.html
   My bibliography  Save this paper

Corporate Governance and Firm Performance: Results from Greek Firms

Author

Listed:
  • Toudas, Kanellos
  • Karathanassis, George

Abstract

In this paper, we construct a Governance Index for a sample of Greek companies quoted on the Athens Stock Exchange. We then classify firms, using each firm governance index, into three governance portfolios. Furthermore, the Fama and French model, extended to include a momentum variable, is tested for each of the three governance portfolios. Our findings suggest that most of the firms in our sample are semi-democracies followed by democracies and dictatorships respectively. Good governance appears to be of value in as much as we found higher Tobin’s q ratios for democracies followed by semi-democracies and dictatorships. We, also, report significant negative abnormal returns for shareholder-friendly and manager-friendly firms. The findings of significant negative abnormal returns are consistent with inefficient capital markets. At a practitioner level, the results imply that firms should practice vigorously good governance, as it is a policy of value to shareholders and possibly to other stakeholders.

Suggested Citation

  • Toudas, Kanellos & Karathanassis, George, 2007. "Corporate Governance and Firm Performance: Results from Greek Firms," MPRA Paper 6414, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:6414
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/6414/1/MPRA_paper_6414.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Stein, Jeremy C, 1988. "Takeover Threats and Managerial Myopia," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 61-80, February.
    2. Roger Otten & Dennis Bams, 2002. "European Mutual Fund Performance," European Financial Management, European Financial Management Association, vol. 8(1), pages 75-101, March.
    3. Mine Aksu & Arman Kosedag, 2006. "Transparency and Disclosure Scores and their Determinants in the Istanbul Stock Exchange," Corporate Governance: An International Review, Wiley Blackwell, vol. 14(4), pages 277-296, July.
    4. Shleifer, Andrei & Vishny, Robert W, 1997. "A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    5. Spanos, Loukas & Tsipouri, Lena & Xanthakis, Manolis, 2006. "Corporate governance rating in a small open capital market: Methodology and applications in the Greek market," MPRA Paper 42896, University Library of Munich, Germany.
    6. Berk, Jonathan B, 1995. "A Critique of Size-Related Anomalies," The Review of Financial Studies, Society for Financial Studies, vol. 8(2), pages 275-286.
    7. Paul Gompers & Joy Ishii & Andrew Metrick, 2003. "Corporate Governance and Equity Prices," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 107-156.
    8. Michaely, Roni & Thaler, Richard H & Womack, Kent L, 1995. "Price Reactions to Dividend Initiations and Omissions: Overreaction or Drift?," Journal of Finance, American Finance Association, vol. 50(2), pages 573-608, June.
    9. Benjamin E. Hermalin & Michael S. Weisbach, 2003. "Boards of directors as an endogenously determined institution: a survey of the economic literature," Economic Policy Review, Federal Reserve Bank of New York, vol. 9(Apr), pages 7-26.
    10. John, Kose & Senbet, Lemma W., 1998. "Corporate governance and board effectiveness1," Journal of Banking & Finance, Elsevier, vol. 22(4), pages 371-403, May.
    11. Lucian Arye Bebchuk & Lars A. Stole, 1994. "Do Short-Term Managerial Objectives Lead to Under- or Over-Investment in Long-Term Projects," NBER Technical Working Papers 0098, National Bureau of Economic Research, Inc.
    12. Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 73(2), pages 110-110.
    13. K. J. Martijn Cremers & Vinay B. Nair, 2005. "Governance Mechanisms and Equity Prices," Journal of Finance, American Finance Association, vol. 60(6), pages 2859-2894, December.
    14. Carhart, Mark M, 1997. "On Persistence in Mutual Fund Performance," Journal of Finance, American Finance Association, vol. 52(1), pages 57-82, March.
    15. Lena Tsipouri & Manolis Xanthakis, 2004. "Can Corporate Governance be Rated? Ideas based on the Greek experience," Corporate Governance: An International Review, Wiley Blackwell, vol. 12(1), pages 16-28, January.
    16. Pound, John, 1988. "Proxy contests and the efficiency of shareholder oversight," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 237-265, January.
    17. Roll, Richard & Ross, Stephen A, 1994. "On the Cross-sectional Relation between Expected Returns and Betas," Journal of Finance, American Finance Association, vol. 49(1), pages 101-121, March.
    18. G.A. Karathanassis & A.A. Drakos, 2004. "A note on equity ownership and corporate value in Greece," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 25(8), pages 537-547.
    19. William C. Brainard & James Tobin, 1968. "Pitfalls in Financial Model-Building," Cowles Foundation Discussion Papers 244, Cowles Foundation for Research in Economics, Yale University.
    20. Lucian Bebchuk & Alma Cohen & Allen Ferrell, 2009. "What Matters in Corporate Governance?," The Review of Financial Studies, Society for Financial Studies, vol. 22(2), pages 783-827, February.
    21. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
    22. Henry G. Manne, 1965. "Mergers and the Market for Corporate Control," Journal of Political Economy, University of Chicago Press, vol. 73(4), pages 351-351.
    23. Bebchuk, Lucian Arye & Stole, Lars A, 1993. "Do Short-Term Objectives Lead to Under- or Overinvestment in Long-Term Projects?," Journal of Finance, American Finance Association, vol. 48(2), pages 719-729, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marinko Škare & Tea Hasić, 2016. "Corporate governance, firm performance, and economic growth -- theoretical analysis," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 17(1), pages 35-51, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Guernsey, Scott & Sepe, Simone M. & Serfling, Matthew, 2022. "Blood in the water: The value of antitakeover provisions during market shocks," Journal of Financial Economics, Elsevier, vol. 143(3), pages 1070-1096.
    2. Drobetz, W. & Momtaz, Paul P., 2020. "Antitakeover Provisions and Firm Value: New Evidence from the M&A Market," Journal of Corporate Finance, Elsevier, vol. 62(C).
    3. Bebchuk, Lucian A. & Cohen, Alma, 2005. "The costs of entrenched boards," Journal of Financial Economics, Elsevier, vol. 78(2), pages 409-433, November.
    4. Benjamin S. Kay & Cindy M. Vojtech, 2015. "Corporate Governance Responses to Director Rule Changes," Staff Discussion Papers 15-02, Office of Financial Research, US Department of the Treasury.
    5. Cremers, K.J. Martijn & Litov, Lubomir P. & Sepe, Simone M., 2017. "Staggered boards and long-term firm value, revisited," Journal of Financial Economics, Elsevier, vol. 126(2), pages 422-444.
    6. Zeineb Barka & Taher Hamza, 2020. "The effect of large controlling shareholders on equity prices in France: monitoring or entrenchment?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 24(3), pages 769-798, September.
    7. Ding, Wenzhi & Levine, Ross & Lin, Chen & Xie, Wensi, 2021. "Corporate immunity to the COVID-19 pandemic," Journal of Financial Economics, Elsevier, vol. 141(2), pages 802-830.
    8. Rowoldt, Maximilian & Starke, Dennis, 2016. "The role of governments in hostile takeovers – Evidence from regulation, anti-takeover provisions and government interventions," International Review of Law and Economics, Elsevier, vol. 47(C), pages 1-15.
    9. Tristan Oliver Stenzaly, 2023. "The effect of staggered boards on firm value during market shocks," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 37(4), pages 457-497, December.
    10. Maximilian Sturm & Stephan Nüesch, 2019. "Strong shareholder rights, internal capital allocation efficiency, and the moderating role of market competition and external financing needs," Review of Managerial Science, Springer, vol. 13(1), pages 93-111, February.
    11. Ahluwalia, Saurabh & Ferrell, Linda & Ferrell, O.C. & Gandhi, Priyank, 2024. "Does being ethical pay? Evidence from the implementation of SOX Section 406," Journal of Business Research, Elsevier, vol. 183(C).
    12. Cremers, K. J. Martijn & Litov, Lubomir P. & Sepe, Simone M., 2013. "Staggered Boards and Firm Value, Revisited," Working Papers 13-36, University of Pennsylvania, Wharton School, Weiss Center.
    13. Cohen, Alma & Wang, Charles C.Y., 2013. "How do staggered boards affect shareholder value? Evidence from a natural experiment," Journal of Financial Economics, Elsevier, vol. 110(3), pages 627-641.
    14. Nicolas Kohl & Wolfgang Schaefers, 2012. "Corporate Governance and Market Valuation of Publicly Traded Real Estate Companies: Evidence from Europe," The Journal of Real Estate Finance and Economics, Springer, vol. 44(3), pages 362-393, April.
    15. Lucian Bebchuk & Oliver Hart, 2001. "Takeover bids vs. Proxy Fights in Contests for Corporate Control," NBER Working Papers 8633, National Bureau of Economic Research, Inc.
    16. Bebchuk, Lucian A. & Cohen, Alma & Wang, Charles C.Y., 2013. "Learning and the disappearing association between governance and returns," Journal of Financial Economics, Elsevier, vol. 108(2), pages 323-348.
    17. Becker, Bo & Cronqvist, Henrik & Fahlenbrach, Rüdiger, 2011. "Estimating the Effects of Large Shareholders Using a Geographic Instrument," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 46(4), pages 907-942, August.
    18. Taher Hamza & Nada Mselmi, 2017. "Corporate Governance and Equity Prices: The Effect of Board of Directors and Audit Committee Independence," Post-Print hal-03380724, HAL.
    19. Vicente Cuñat & Mireia Gine & Maria Guadalupe, 2012. "The Vote Is Cast: The Effect of Corporate Governance on Shareholder Value," Journal of Finance, American Finance Association, vol. 67(5), pages 1943-1977, October.
    20. Eugster, Nicolas & Isakov, Dušan, 2019. "Founding family ownership, stock market returns, and agency problems," Journal of Banking & Finance, Elsevier, vol. 107(C), pages 1-1.

    More about this item

    Keywords

    Corporate Governance; Firm Performance; Democratic and Dictatorship Firms;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:6414. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.