Corporate governance and the stock market reaction to new product announcements

Wen Chun Lin, Shao Chi Chang

Research output: Contribution to journalArticlepeer-review

19 Citations (Scopus)


This study examines the explanatory power of corporate governance mechanisms on the wealth effect of firms' new product strategies. We show that board size, board independence, audit committee independence, CEO equity-based pay, analyst following and shareholder rights are all of significance in explaining the variations in the wealth effect of new product introductions. Our results reveal that the new product strategies announced by firms with better corporate governance mechanisms tend to receive higher stock market valuations than those of firms with poorer governance mechanisms. This study provides empirical support for the notion that enhanced governance mechanisms can reduce both agency and information asymmetry problems for firms announcing new products.

Original languageEnglish
Pages (from-to)273-291
Number of pages19
JournalReview of Quantitative Finance and Accounting
Issue number2
Publication statusPublished - 2012 Aug

All Science Journal Classification (ASJC) codes

  • Accounting
  • Business, Management and Accounting(all)
  • Finance


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