Factoring governance risk into investors´expected rates of return by means of a weighted average governance index

Rodolfo Apreda

No 356, CEMA Working Papers: Serie Documentos de Trabajo. from Universidad del CEMA

Abstract: Although global investors have been paying more heed than ever to Corporate Governance for the last decade, the evolving premium risk stemming from variegated governance issues has not been factored yet into the expected return of any investor’s portfolio. From a theoretical standpoint, this paper sets forth firstly a weighted-average index built up by choosing distinctive and relevant governance variables that go beyond provisions usually embedded in the founding charter. Afterwards, a measure of governance risk premium will be derived out of the index rate of change. Lastly, it will be introduced a multiplicative model of expected returns with a risk adjustment factor over the risk-free asset comprising systematic, nonsystematic, country and governance risk premiums.

Keywords: governance risk; governance index; governance rate; expected return; risk adjustment (search for similar items in EconPapers)
JEL-codes: G11 G12 G34 (search for similar items in EconPapers)
Pages: 245 pages
Date: 2007-09
New Economics Papers: this item is included in nep-rmg
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.ucema.edu.ar/publicaciones/download/documentos/356.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cem:doctra:356

Access Statistics for this paper

More papers in CEMA Working Papers: Serie Documentos de Trabajo. from Universidad del CEMA Contact information at EDIRC.
Bibliographic data for series maintained by Valeria Dowding ().