Thursday, June 17, 2004

It pays to be good!

Durnev and Kim in a forthcoming Journal of Finance article provide further evidence that it pays to be good. Why? Becuase firms with stronger shareholder protections are generally rewarded with a higher valuation (and hence lower cost of capital) than their peers. MOrevoer, the authors show that the cost of being bad is higher when there are many growth opportunities and when the country has fewer investor protections.

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