n Investment Analysts Journal - The stock market reaction to criticism of corporate governance practices of companies listed on the JSE

Volume 2010, Issue 72
  • ISSN : 1029-3523
  • E-ISSN: 2077-0227
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This paper investigates a key aspect of possible reputational damage to a company: the publication of criticism of corporate governance practice in the financial press. To understand the valuation effect associated with such criticism, long-run abnormal returns following the publication date are examined. In addition to the initial negative reaction on publication, the companies in the sample experienced further significant risk-adjusted returns of -15,15% and -22,94% respectively over the next one and two years. A decline in future operating performance appears to be an important reason for the poor stock market performance of the companies. These results underscore the importance of investors fully understanding the disclosure of a company's corporate governance practice.

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