||The Examination of the Importance of Corporate Governance: Evidence from Investment Behavior and Risks of Mutual Funds
||Department of Business Administration
Recently, corporate governance has become a popular issue in academia. Scholars try to know how corporate governance influences operations of firms by examining the relationship between factors such as performance and corporate governance. Besides, in practice, companies have also claimed that they pay attention on this issue. Theoretically, since the purpose of the existence of corporate governance is to solve the agency problem, it’s reasonable to understand investors’ view on it. In this paper, we’re going to figure out whether investors think corporate governance is a considerable factor or not when they’re investing. The research examines the relationship between some risk factors and corporate governance. We used 46 companies studied by CLSA’s corporate governance report in 2001 as our sample firms. In addition, 48 balanced and stock funds were also selected as the proxy for investors’ risk preference condition. The methodologies used to test these samples are univariate analyses, T-tests which aim at testing if there’s different investment preference for corporate governance, abnormal stock return, aiming at knowing how investors react when something special happened, and regression analysis, an extension of univriate analysis and can be used to infer the degree of investors’ reactions. The empirical results show that fund managers, no matter how risky their funds were, did not prefer to invest according to corporate governance. Individual investors did not have a significant preference for firms that have higher or lower corporate governance scores, either. Nevertheless, we found that corporate governance can be one of the risk indices. It means that even though corporate governance is related to firm risk, investors still did not pay much attention on it when they were making their investment decisions.
Chapter 1 Introduction 1
1.1 Research Background 1
1.2 Research Motivation 2
1.3 Research Purpose 3
Chapter 2 Literatures Review 5
2.1 Development of Corporate Governance 5
2.2 Corporate Governance and Firm Performance 7
2.3 Theories of Risk 9
2.4 Comparison and Possible Research Directions 10
Chapter 3 Sample Construction and Methodology 12
3.1 Sample Construction 12
3.1.1 Sample Companies of Corporate Governance 12
3.1.2 Fund Sample Construction 17
3.1.3 Characteristics of the Sample 21
3.2 Relationship between Risk and Corporate Governance 23
3.3 Multivariable Analysis 26
Chapter 4 Empirical Results 30
4.1 Results of Univariate Analysis 30
4.2 Abnormal Stock Return 34
4.3 Results of Multivariable Analysis 39
Chapter 5 Conclusion 51
5.1 Conclusion 51
5.2 Limitation of the Research and Directions for Further Development 53
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