The Effectiveness of Board Committees and Governance Premium

This paper investigates whether the board committees can provide governance premiums, which means we examine whether the corporate with sub-committees could bring cumulative abnormal returns to the investors. Using the unbalanced panel data of 2235 company-years we find that the corporate with nomination, strategy and audit committees can bring significant premiums to their investors, which means that firms with good corporate governance can bring extra returns to the investors. This empirical evidence is broadly consistent with the survey of the McKinsey & Company, but we further provide the realistic proof of the governance premium.