Public governance and the demand for corporate governance: The role of political institutions

Nan-Ting Kuo and Cheng-Few Lee

Research in International Business and Finance, 2024, vol. 67, issue PB

Abstract: Our study explores the association between political institutions and the demand for corporate governance. Stulz (2005) suggests that government expropriation reduces the value of corporate governance realized by investors. Accordingly, we argue that strong political institutions induce higher demand for corporate governance because they constrain government expropriation. Exploring an international sample, we find that firms in countries with stronger political institutions implement more governance provisions. Mediation analysis demonstrates that political institutions work through the channel of constraining government expropriation. Moreover, government expropriation makes shareholder direct control over firms more prevalent, where political institutions influence the allocation of control rights between managers and investors, which affects the demand for corporate governance. We contribute to the corporate governance literature and the agency problem literature.

Keywords: Political institutions; Corporate governance; Public governance (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0275531923002143
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:67:y:2024:i:pb:s0275531923002143

DOI: 10.1016/j.ribaf.2023.102088

Access Statistics for this article

Research in International Business and Finance is currently edited by T. Lagoarde Segot

More articles in Research in International Business and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().