Abstract
Purpose: One of the challenging subjects that has been discussed in various kinds in the financial literature is abnormal returns. In this regard, a significant part of capital market studies is to investigate the behavior of returns and the factors them. In this context, shareholder's protection as a construct multidimensional can be considered in studies related to stock returns and help to improve price informative. Therefore, the purpose of this study is to analyze the effect of shareholder protection on abnormal returns.
Methods: In this research, the information related to 166 firms on the Tehran Stock Exchange during the years 2006 to 2022 has been tested using panel data and unbalanced panel methods, and robust tests have been used to strengthen the findings.
Results: The findings show that in firms whose institutional ownership changed, the composite index of shareholder's protection has a negative effect on abnormal returns. However, such a link is not established in all industries, especially political industries. Also, there was a significant difference in the years before and after the structural break.
Conclusion: According to the hypothesis of information content, this result shows that shareholders protection through transactions of knowledgeable investors such as institutional shareholders helps the stock prices to be closer to the Intrinsic value.
Contribution: This research can provide a new field of study. Because interdisciplinary concepts such as shareholder's protection, which are subjectivity at micro and macro levels, are important for explaining market phenomena.
Main Subjects
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