The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu The leading online blog in the fields of corporate governance and financial regulation. Fri, 26 Jun 2026 15:11:10 +0000 en-US hourly 1 https://wordpress.org/?v=6.5.8 https://corpgov.law.harvard.edu/wp-content/uploads/2024/02/cropped-photography-4-e1706898544564-1-32x32.png The Market Reaction to Corporate Governance Regulation – The Harvard Law School Forum on Corporate Governance https://corpgov.law.harvard.edu 32 32 The Market Reaction to Corporate Governance Regulation https://corpgov.law.harvard.edu/2010/09/20/the-market-reaction-to-corporate-governance-regulation/?utm_source=rss&utm_medium=rss&utm_campaign=the-market-reaction-to-corporate-governance-regulation https://corpgov.law.harvard.edu/2010/09/20/the-market-reaction-to-corporate-governance-regulation/#comments Mon, 20 Sep 2010 13:32:45 +0000 http://blogs.law.harvard.edu/corpgov/?p=12784?d=20150106102507EST Posted by R. Christopher Small, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Monday, September 20, 2010
Editor's Note:

The following post comes to us from David Larcker, Professor of Accounting at Stanford University; Gaizka Ormazabal of the Accounting Department at Stanford University; and Daniel Taylor, Assistant Professor at the University of Pennsylvania.

In the paper, The Market Reaction to Corporate Governance Regulation, which was recently made publicly available on SSRN, we investigate the market reaction to recent legislative and regulatory actions pertaining to corporate governance. The managerial power view of governance suggests that executive pay, the existing process of proxy access, and various governance provisions (e.g., staggered boards and CEO-chairman duality) are associated with managerial rent extraction. This perspective predicts that broad government actions that reduce executive pay, increase proxy access, and ban such governance provisions are value enhancing. In contrast, another view of governance suggests that observed governance choices are the result of value-maximizing contracts between shareholders and management. This perspective predicts that broad government actions that regulate such governance choices are value destroying.

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