Markets Learn

In new empirical research, Alma Cohen, Charles C.Y. Wang, and I show how stock markets have learned to price anti-takeover provisions. This learning by markets has important implications for both managements of publicly traded companies and their investors…

while investors can no longer profit by basing their trading decisions on standard anti-takeover provisions, our findings leave open the possibility that an investment strategy based on other features of corporate governance might be worthwhile. Thus, managements should not dismiss governance reforms that are potentially valuable, but that investors are not yet focused on, and that markets do not yet price.

via Pricing Corporate Governance by Lucian Bebchuk – Project Syndicate.

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