Differences in Governance Practices between U.S. and Foreign Firms: Measurement, Causes, and Consequences

Reena Aggarwal, Isil Erel, René Stulz and Rohan Williamson
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Reena Aggarwal: Georgetown U
Isil Erel: Ohio State U
Rohan Williamson: Georgetown U

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: We construct a firm-level governance index that increases with minority shareholder protection. Compared to U.S. matching firms, only 12.68% of foreign firms have a higher index. The value of foreign firms falls as their index decreases relative to the index of matching U.S. firms. Our results suggest that lower country-level investor protection and other country characteristics make it suboptimal for foreign firms to invest as much in governance as U.S. firms do. Overall, we find that minority shareholders benefit from governance improvements and do so partly at the expense of controlling shareholders.

JEL-codes: G32 (search for similar items in EconPapers)
Date: 2007-12
New Economics Papers: this item is included in nep-bec
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Citations: View citations in EconPapers (10)

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Related works:
Chapter: Differences in Governance Practices between US and Foreign Firms: Measurement, Causes, and Consequences (2010)
Journal Article: Differences in Governance Practices between U.S. and Foreign Firms: Measurement, Causes, and Consequences (2010)
Journal Article: Differences in Governance Practices between U.S. and Foreign Firms: Measurement, Causes, and Consequences (2009)
Working Paper: Differences in Governance Practices between U.S. and Foreign Firms: Measurement, Causes, and Consequences (2007)
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