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

Hearn, Bruce
; 
Phylaktis, K.
; 
Piesse, J.
Publication Date
2017-08
End of Embargo
Supervisor
Keywords
Asset pricing, International financial markets, Investor protection, Legal origin
Rights
© 2017 Elsevier. Reproduced in accordance with the publisher's self-archiving policy. This manuscript version is made available under the CC-BY-NC-ND 4.0 license (https://creativecommons.org/licenses/by-nc-nd/4.0/)
Peer-Reviewed
Yes
Open Access status
openAccess
Accepted for publication
27/04/2017
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Department
Awarded
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Management and Law Publications
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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 4756 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.
URI
http://hdl.handle.net/10454/18231
Version
Accepted manuscript
Citation
Hearn B, Phylaktis K and Piesse J (2017) Expropriation risk by block holders, institutional quality and expected stock returns. Journal of Corporate Finance. 45: 122-149.
Link to publisher’s version
Link to published version
Link to Version of Record
https://doi.org/10.1016/j.jcorpfin.2017.04.016
Type
Article
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