Do investors benefit from good corporate governance

Purpose – The purpose of this paper is to examine the continuing search for evidence that good corporate governance leads to positive organizational outcomes, and it presents a unique perspective on this issue based on firm size.Design/methodology/approach – The study utilized a comprehensive measure of governance as well as a risk‐adjusted measure of share price in its comparisons between companies known for good governance and broader markets composed of similar‐sized firms.Findings – The findings show evidence of better risk‐adjusted performance across all recent sub‐periods (three‐, five‐, and ten‐year) for the firms in the smallest market capitalization category. Better risk‐adjusted returns were earned for only the ten‐year period for the largest firms and the overall US market. Mid‐cap stocks were not significant in any of the three periods studied. The fact that the small cap stocks showed significance for all three sub‐periods indicates the relationship between good corporate governance practices...