The Political Economy of Corporate Governance

Marco Pagano and Paolo Volpin

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: We analyze the political determinants of investor and employment protection. Our model predicts that proportional electoral systems are conducive to weaker investor protection and stronger employment protection than majoritarian systems. This prediction is consistent with international panel data evidence. The proportionality of the voting system is significantly and negatively correlated with shareholder protection in a panel of 45 countries, and positively correlated with employment protection in a panel of 21 OECD countries. Also other political variables appear to affect regulatory outcomes, especially for the labor market. The origin of the legal system has some additional explanatory power only for employment protection.

Keywords: political economy; shareholder protection; corporate governance; employment legislation; takeovers; mergers and acquisitions. (search for similar items in EconPapers)
JEL-codes: G34 K22 K42 (search for similar items in EconPapers)
Date: 1999-10-01, Revised 2005-07-01
New Economics Papers: this item is included in nep-cfn, nep-law and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (327)

Published in The American Economic Review, Vol. 95, No. 4, September 2005, pages 1005-1030

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Related works:
Journal Article: The Political Economy of Corporate Governance (2005)
Working Paper: The Political Economy of Corporate Governance (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:29

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