Corporate Governance and Ownership: Evidence from a Non-Mandatory Regulation
42 Pages Posted: 4 Sep 2012 Last revised: 24 Jul 2014
Date Written: July 18, 2014
We study the governance choices of firms in a voluntary regulatory regime where we can directly observe the impact of ownership on corporate governance practices pertaining to the composition of the board of directors. We find that firms with a dominant shareholder are more likely to deviate from standards of best practice in corporate governance. However, lesser governance standards in firms where a dominant shareholder is present are not associated with lower performance. In contrast, governance practices and disclosures matter for performance in widely-held firms because they alleviate monitoring and free-rider problems. Our results suggest that the impact of corporate governance practices is the result of complex governance interdependences.
Keywords: corporate governance, dominant shareholders, code of best practice
JEL Classification: G32, G34, G38, K22
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