Research On Listed Corporate Governance Premium Based On Firm Heterogeneity

Since the equity premium puzzle was proposed, many researches are be done athome and abroad, there are four main research perspectives: classical economics,economic operations, behavioral finance and corporate governance, and these studiesexplains the equity premium to some extent. Among them, the corporate governancepremium is a relatively new perspective, it usually analyze the relationship betweencomprehensive quality or level of company management and company value, and thenexplain the existence or size of the equity premium, however, corporate governancepremium research is still lack specific corporate governance factors. In addition,previous studies on corporate governance premium is based on the assumption ofhomogeneity, but now researchers turned to the study of specific governance factorswith the firm heterogeneity hypothesis. Based on the above two, set firm heterogeneityhypothesis as a precondition, this article attempts to analyze weather specific corporategovernance factors can affect corporate governance premium. The main contents andconclusions are as follows:①Combing the researches on the equity premium, and summarizes four majorresearch perspectives: classical economics, economic operations, behavioral finance andcorporate governance premium. Subsequently, defines the concept of corporategovernance premium and explores the sources and measure of governance premium.②Describing relationship between firm heterogeneity and corporate governance,and then extract corporate governance heterogeneity factor. First, this paper analyzes thetheoretical source of firm heterogeneity assumptions, and then studies the relationshipsbetween firm heterogeneity and corporate governance. Secondly, reviews researchesabout the level of corporate governance, this paper integrate listed companies’ financialindicator variables into corporate governance index system Finally, the studysummarizes8corporate governance factors by using factor analysis: basic financialfactor, executive compensation factor, board-executive ownership, stock structure, etc,which can be as research directions of corporate governance premium.③Selecting company’s profitability as a representative of the basic financialfactors, this paper explore explanatory power of the profitability to the corporategovernance premium. First, defines the concept of company’s profitability and analysis its influencing factors. Second, select six indicators: Sales Net Profit Margin, ROE, ROI,ROA, EPS and Share Price Returns to build profitability index system, and thenmeasure the size of the company’s profitability using factor analysis. Finally, the PanelData point individual fixed effects model is be used, as a result there is a positivecorrelation between corporate governance premium and company’s profitability, explainthe governance premium to a certain extent.④Using corporate performance as intermediate variable, this paper explores therelationship between executive team compensation gap and corporate governancepremium, as well as board-executive compensation gap and corporate governancepremium. The results show that corporates with high performance have highergovernance premium. Larger gap of executive team compensation can improvecorporate performance. Larger gap of board-executive compensation can improvecorporate performance. In addition, positive correlation of corporate performance andcorporate governance premium may be enhanced in the companies with larger executiveteam compensation gap, while the positive correlation may be weaken in the companieswhich have larger board-executive compensation gap.