A Study On The Influence Of Corporate Governance To Stock Yield

The investigation of over200institutional investors made by Mckinsey&Companyin2002finds that over80%investors will pay higher prices for stocks of a well-governedcorporate when other factors of corporate are same. And compared with investors of thesame kind, investors from Asian markets are willing to pay20%more. As a norm forrelevant rights and obligations of various interests both inside and outside the corporate,corporate governance mechanism has great influence on corporate management and theprice that the institutional investors will pay.This paper explores empirically how the will of the institutional investor is reflectedin the capital market and how the quality of corporate governance is related to stock yieldrate As the governance risk becomes bigger, the interests of outer investors are harder toprotect and expected yield rate of stocks should be higher in order to match the high risk ofexpected yield.The conception of corporate governance is a series of agreements on rights andobligations rather than a quantitative index. In order to make a quantitative research on therelation between corporate governance and stock yield rate, this paper establishes acomprehensive evaluation index R for governance quality. R is reached by comprehensivecalculation of six sub-indexes which reflect corporate governance quality from differentperspectives from ownership structure, stockholder’s right, controlling shareholdercharacteristic, board composition and incentive mechanism.After making groups for all samples based on the R value, the research finds that yieldrate from different groups adjusted by the three-factor model doesn’t contribute tosignificant abnormal return. This means that current stock level has contained investor’sexpectations to corporate governance quality differences. This paper further finds thatsensitive coefficient of stock yield rate to market risk becomes smaller as corporategovernance quality is better, which reflects that corporates of good governance quality runa more steady business and are show more coherence in personnel allocation and businessstrategies.