1. Introduction
In an important and oft-cited paper, Gompers, Ishii, and Metrick (GIM, 2003) study the impact of corporate governance on firm
performance during the 1990s. They find that stock returns of firms with strong shareholder rights outperform, on a risk-adjusted
basis, returns of firms with weak shareholder rights by 8.5%/year during this decade. Given this result, serious concerns can be
raised about the efficient market hypothesis, since these portfolios could be constructed with publicly available data. On the policy
domain, corporate governance proponents have prominently cited this result as evidence that good governance (as measured by
GIM) has a positive impact on corporate performance.