Corporate governance, investment behavior and stock returns

Based on agency theory of the firm, and the special institutional setting that China corporate governance evolve from mandatory governance in ldquocompliancerdquo stage to voluntary governance in ldquoinnovationrdquo stage, this paper analyses how voluntary governance affect stock returns under the research paradigm of ldquogovernance mechanism-corporate behavior-economic consequences rdquo. Subsequently, apply positive tests by using the data on China's listed companies data from 2005 to 2007. We find that, investor relations and stock returns significantly correlated, and ways to achieve by the mediator variable for investment behavior. The study found explore the specific channel of corporate governance affect the economic consequences, open the ldquoblack boxesrdquo between them, and provide a useful perspective of the understanding of corporate governance affect economic consequences.