Expropriation risk by block holders, institutional quality and expected stock returns

Hearn, Bruce, Phylaktis, Kate and Piesse, Jenifer (2017) Expropriation risk by block holders, institutional quality and expected stock returns. Journal of Corporate Finance, 45. pp. 122-149. ISSN 0929-1199

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Abstract

We study the asset pricing implications arising from imperfect investor protection using a new governance measure. This is defined as the product of institutional quality in a country and the proportion of free float shares, which captures the impact of controlling block holders. Using monthly returns of 4,756 blue chip firms from 50 international equity markets for 13 years, we show through tests of variants of the augmented-CAPM, that a two factor CAPM augmented with a factor mimicking portfolio based on our new investor protection metric yields the highest explanatory power, especially for markets that exhibit true variation in ownership types

Item Type: Article
Additional Information: G3, G11, G12, G15
Keywords: Investor Protection, Legal Origin, Asset Pricing, International Financial Markets
Schools and Departments: School of Business, Management and Economics > Business and Management
Research Centres and Groups: International Business
Subjects: H Social Sciences > HG Finance > HG0178 Liquidity
H Social Sciences > HG Finance > HG4501 Investment, capital formation, speculation > HG4530 Investment companies. Investment trusts. Mutual funds
H Social Sciences > HG Finance > HG4501 Investment, capital formation, speculation > HG4551 Stock exchanges
Depositing User: Bruce Hearn
Date Deposited: 27 Apr 2017 14:40
Last Modified: 19 May 2017 07:30
URI: http://sro.sussex.ac.uk/id/eprint/67549

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