Stock markets are supposed to be the ultimate arbiter of company worth. But do they factor in a country’s corruption or virtue in valuing businesses?
Yes, says Charles M.C. Lee, an expert on markets and accounting at Stanford’s Graduate School of Business. The GSB professor recently discussed his research showing that ethical lapses matter in the market value of companies. Publicly held firms in countries perceived as less corrupt trade at bigger market premiums than those in places considered more corrupt, according to Lee. “Virtue seems to pay — at least over the longer term,” he said in a November 5 talk.
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