Good Corporate Governance Factored into Stock Prices

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    Companies with good corporate governance standards—those that avoided no poison pills, staggered boards, golden parachutes, and other practices favoring management—helped boost share prices, according to a new study by three university professors: Lucian Bebchuk of Harvard Law School; Alma Cohen of Tel Aviv University and Charles C. Y. Wang of Stanford. 

    The study found that companies with good corporate governance practices from 2000 to 2008 had incorporated higher valuations into their stock prices as a result of practicing better governance. 

    An earlier study in 2003 found that total annual return data from 1990 to 1999 found that companies that were well-governed outperformed companies without these higher standards by 8.5%.

    The conclusion:  Investor recognize companies that practice good governance and factor that information into the companies’ share prices. These positive practices help branding and deliver measureable incrases in equity prices for all investors, not just management.

    Source:  Corporate Board Member, third quarter, 2010, page 21.

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    Chuck Epstein has managed marketing communications and public relations departments for major global financial institutions and participated in the launch of industry-changing financial products. He also has written by-lined articles for over 50 publications, five books and served as editor and publisher of nation’s first newsletter on the topic of using the PC for personal investing and trading. (“Investing Online, 1994-1999). He also is a marketing consultant, writer and speaker on topics related to investor protection and opportunities in the very dynamic cannabis industry. He has held senior-level marketing, PR and communications positions at the New York Futures Exchange, Chicago Mercantile Exchange, Lind-Waldock, Zacks Investment Research, Russell Investments and Principal Financial. He has won national awards from the Mutual Fund Education Alliance (MFEA) and his web site, www.mutualfundreform.com, was named best small blog in 2009 by the Society of American Business Editors and Writers (SABEW).

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