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corporate governance, shareholder rights, financial performance
In the 21st century, greater attention is being paid to the issue of shareholder rights and corporate governance in U.S. corporations by regulators, shareholders and the general public. A previous paper by the authors finds that the level of shareholder rights generally has not increased and may have declined amongst the S&P 500 companies, despite the recent legislative and regulatory reforms. Evidence suggests that instead firms are searching for an optimum level of shareholder rights that balances the risks and rewards of greater shareholder rights. This study investigates the financial performance of firms with greater shareholder rights (GSR) and contrasts it with that of firms with lower shareholder rights (LSR). This paper finds that GSR firms may perform better on some financial criteria, in absolute terms, but when adjusted for volatility, LSR firms may perform better, contrary to the conventional wisdom.