Corporate Governance, Capital MarketDiscipline and the Returns on Investment

Klaus Gugler (), Dennis Mueller () and Burcin Yurtoglu

No FS IV 01-25, CIG Working Papers from Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG)

Abstract: We analyze the impact of corporate governance institutions, ownership structures andexternal capital market constraints on company returns on investment by using a sampleof more than 19,000 companies from 61 countries across the world. We show that (1) ofthese three sets of institutions, the origin of a country’s legal system proves to be themost important. Companies in countries with English-origin legal systems earn returnson investment that are at least as large as the cost of capital. (2) Differences ininvestment performance related to a country’s legal system dominate differences relatedto ownership structure. (3) Strong external capital markets improve the investmentperformance of companies. ZUSAMMENFASSUNG - (Corporate Governance, Kapitalmarktdisziplinierung und die Renditen vonUnternehmensinvestitionen) Dieses Papier analysiert den Einfluss von Corporate Governance Institutionen, Eigentümerstrukturen und externen Kapitalmärkten auf die Renditen von Investitionen für ein Sample von mehr als 19.000 Unternehmen aus 61 Ländern weltweit. Wir zeigen, dass von diesen drei Institutionen (1) die Herkunft des Rechtssystems eines Landes der wichtigste Faktor ist. Unternehmen in Ländern mit Rechtssystemen englischer Herkunft verdienen Renditen, die die Kapitalkosten im Durchschnitt abdecken. (2) Unterschiede im Rechtssystem eines Landes dominieren Unterschiede in der Eigentümerstruktur. (3) Funktionierende externe Kapitalmärkte verbessern die Performance von Investitionen.

Keywords: Return on Investment; Ownership Structure; Coporate Governance; Capital Market (search for similar items in EconPapers)
JEL-codes: G32 G34 L21 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2001-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Published under the title "Corporate Governance and the Returns on Investment" in the Journal of Law and Economics , Vol. 47, 2004, pp. 589-633.

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