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K.J. Martjin Cremers

Spotlight Research: Thirty Years of Shareholder Rights and Firm Valuation

This paper explores the relationship between shareholder rights and firm valuation.

This research introduces a new hand-collected dataset that tracked restrictions on shareholder rights at approximately 1,000 firms from 1978-1989. In conjunction with 1990-2006 IRRC data, the authors tracked firms’ shareholder rights over thirty years. Most governance changes occurred during the 1980s. The data found a robustly negative association between restrictions on shareholder rights (using the G-Index as a proxy) and Tobin’s Q. The negative association only appears after the judicial approval of antitakeover defenses in the 1985 landmark Delaware Supreme Court decision of Moran v. Household. This decision was an unanticipated, exogenous shock that increased the importance of shareholder rights.

Other Research

• Staggered Boards and Long-Term Firm Value, Revisited, forthcoming in the Journal of Financial Economics (with Lubomir Litov and Simone Sepe)
• Do Mutual Fund Investors Get What They Pay For? The Legal Consequences of Closet Index Funds, forthcoming in the Virginia Law & Business Review (with Quinn Curtis)
• Pension Fund Asset Allocation and Liability Discount Rates, forthcoming in the Review of Financial Studies (with Aleks Andonov and Rob Bauer)
• "Active Share and the Three Pillars of Active Management: Skill, Conviction and Opportunity", forthcoming in the Financial Analysts Journal
• Thirty Years of Shareholder Rights and Firm Valuation. Journal of Finance, Forthcoming (with Allen Ferrell)
• Patient Capital Outperformance: The Investment Skill of High Active Share Managers Who Trade Infrequently, Journal of Financial Economics 122, 288-306 (with Ankur Pareek)
• Commitment and Entrenchment in Corporate Governance, 2016, Northwestern Law Review 110(4), 727-810 (with Saura Masconale and Simone M. Sepe)
• Indexing and Active Fund Management: International Evidence, 2016, Journal of Financial Economics 120(3), 539-560 (with Miguel Ferreira, Pedro Matos and Laura Starks)
• Uncertainty and Valuations, 2016, Critical Finance Review 5(1), 85-128 (with Hongjun Yan)
• The Shareholder Value of Empowered Boards, 2016, Stanford Law Review 68, 67-148 (with Simone Sepe)
• Short-Term Trading and Stock Return Anomalies: Momentum, Reversal and Share Issuance, 2015, Review of Finance 19(4), 1649-1701 (with Ankur Pareek)
• Aggregate Jump and Volatility Risk in the Cross-Section of Stock Returns, (with Michael Halling, David Weinbaum), in Journal of Finance, 2014.
• “Does the Market for CEO Talent Explain Controversial CEO Pay Practices?” (with Yaniv Grinstein), ), forthcoming in the Review of Finance, 2014
• Uncertainty and Valuations (with Hongjun Yan), forthcoming in the Critical Finance Review, 2014
• Should Benchmark Indices Have Alpha? Revisiting Performance Evaluation (with Antti Petajisto and Eric Zitzewitz), forthcoming in the Critical Finance Review, Issue 1, 2013, 1-48.