Corporate Governance as a Value Driver in Canada

Assessing a firm’s corporate governance is an integral part of an equity valuation; however it is gradually becoming less and less of the process. A large separation between shareholders and manager has formed – each with distinctly different motivations. It is our belief that Democracy firms (corporations with motivations aligned with shareholders) should outperform Dictator firms (corporations with motivations aligned with management) in the long-run in Canada. Our results do not demonstrate statistical significance regarding our hypothesis; nonetheless, we caution investors who are enthusiastic about investing in firms who knowingly express their motivations away from their investors.