Corporate Governance and Regulation: Can There be too Much of a Good Thing?

Corporate Governance and Regulation: Can There be too Much of a Good Thing?

Valentina Giulia Bruno, Stijn Claessens

Series number :

Serial Number: 
142/2007

Date posted :

October 01 2006

Last revised :

November 06 2018
SSRN Share

Keywords

  • Corporate governace practices • 
  • Regulatory regimes • 
  • Company valuation

We investigate how company-level corporate governance practices and country-level legal investor protection jointly affect company performance. We find that in any legal regime a few specific governance practices improve performance.

Companies with good governance practices operating in stringent legal environments, however, show a valuation discount relative to similar companies operating in flexible legal environments. At the same time, a stronger country-level regime does not reduce the valuation discount of companies with weak governance practices. Our analysis suggests a threshold level of country development above which stringent regulation hurts the performance of well governed companies or has a neutral effect for poorly governed companies.

Published in

Published in: 
Publication Title: 
Journal of Financial Intermediation
Description: 
Volume 19, Issue 4, October 2010, Pages 461-482

Authors