Learning and the disappearing association between governance and returns

Lucian A. Bebchuk*, Alma Cohen, Charles C.Y. Wang

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


The correlation between governance indices and abnormal returns documented for 1990-1999 subsequently disappeared. The correlation and its disappearance are both due to market participants' gradually learning to appreciate the difference between good-governance and poor-governance firms. Consistent with learning, the correlation's disappearance was associated with increases in market participants' attention to governance; market participants and security analysts were, until the beginning of the 2000s but not subsequently, more positively surprised by the earning announcements of good-governance firms; and, although governance indices no longer generated abnormal returns during the 2000s, their negative association with firm value and operating performance persisted.

Original languageEnglish
Pages (from-to)323-348
Number of pages26
JournalJournal of Financial Economics
Issue number2
StatePublished - May 2013


  • Analyst forecasts
  • Asset pricing
  • Behavioral finance
  • Corporate governance
  • E-Index
  • Earning announcements
  • Entrenchment
  • G-Index
  • GIM
  • Governance indices
  • IRRC provisions
  • Learning
  • Market efficiency
  • Shareholder rights


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