A Cross Country Comparison of Corporate Governance and Firm Performance: Do Financial Structure and the Legal System Matter?
Journal of Contemporary Accounting and Economics, Forthcoming
Posted: 11 Jun 2009
Date Written: June 10, 2009
We blend the corporate governance and the financial structure/legal system literature streams to study whether firm performance is enhanced when its governance structure embodies the demands of the host country’s financial structure and legal system. Using a sample of 1,736 unique firms representing 22 countries, we find that the joint effect of a country’s financial structure and legal system does matter when explaining the relationship between performance and the overall level of corporate governance in a given country. The results also suggest that firms operating in the market/common combination countries tend to command higher market valuations than firms with a comparable level of corporate governance that operate in the bank/civil combination countries.
Keywords: Corporate Governance, Financial System, Market-based, Bank-based, Legal System, Common-law, Civil-law, Firm Performance, Tobin’s Q
JEL Classification: F30, G15, G28, G32, G34, K22, K40
Suggested Citation: Suggested Citation