Hostname: page-component-5c6d5d7d68-qks25 Total loading time: 0 Render date: 2024-08-23T02:06:50.018Z Has data issue: false hasContentIssue false
  • English
  • Français

Does Competition Matter for Corporate Governance? The Role of Country Characteristics

Published online by Cambridge University Press:  01 November 2016

Jean-Claude Cosset ,
Hyacinthe Y. Somé  and
Pascale Valéry
Get access Rights & Permissions [Opens in a new window]

Abstract

We investigate the role of country characteristics on the competition-governance relation. We find that competition is associated with higher ratings in corporate governance, but only in developing countries. Further, corporate governance is associated with greater firm value, but only in less competitive industries from developed countries. For developing countries, the evidence suggests that corporate governance is valuable mostly in competitive industries. Additional tests show that corporate governance increases labor productivity and cost efficiency, mostly in less competitive industries in both developed and developing countries. Furthermore, in developing countries, corporate governance increases investment in capital, but primarily in competitive industries.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 51 , Issue 4 , August 2016 , pp. 1231 - 1267
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2016 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Aggarwal, R.; Erel, I.; Ferreira, M.; and Matos, P.. “Does Governance Travel Around the World? Evidence from Institutional Investors.” Journal of Financial Economics, 100 (2011), 154–181.Google Scholar
Aggarwal, R.; Erel, I.; Stulz, R.; and Williamson, R.. “Differences in Governance Practice Between U.S. and Foreign Firms: Measurement, Causes, and Consequences.” Review of Financial Studies, 22 (2009), 3131–3169.Google Scholar
Ammann, M.; Oesch, D.; and Schmid, M. M.. “Product Market Competition, Corporate Governance, and Firm Value: Evidence from the EU Area.” European Financial Management, 19 (2013), 452–469.CrossRefGoogle Scholar
Attig, N.; Cleary, S.; El Ghoul, S.; and Guedhami, O.. “Institutional Investment Horizon and Investment–Cash Flow Sensitivity.” Journal of Banking and Finance, 36 (2012), 1164–1180.Google Scholar
Beamish, P. W., and Banks, J. C.. “Equity Joint Ventures and the Theory of Multinational Enterprise.” Journal of International Business Studies, 18 (1987), 1–16.CrossRefGoogle Scholar
Bebchuk, L. A.; Cohen, A.; and Ferrell, A.. “What Matters in Corporate Governance?” Review of Financial Studies, 22 (2009), 783–827.CrossRefGoogle Scholar
Beck, T., and Demirgüç-Kunt, A.. “Financial Institutions and Markets Across Countries and Over Time: Data and Analysis.” World Bank Policy Research Working Paper No. 4943 (2009).Google Scholar
Bergh, V. D. R. J., and Camesasca, P. D.. European Competition Law and Economics: A Comparative Perspective. Intersentia: Antwerpen-Groningen (2001).Google Scholar
Bertrand, M., and Mullainathan, S.. “Enjoying the Quiet Life? Corporate Governance and Managerial Preferences.” Journal of Political Economy, 111 (2003), 1043–1075.CrossRefGoogle Scholar
Chen, K. C. W.; Chen, Z.; and Wei, K. C. J.. “Agency Costs of Free Cash Flow and the Effect of Shareholder Rights on the Implied Cost of Equity Capital.” Journal of Financial and Quantitative Analysis, 46 (2011), 171–207.CrossRefGoogle Scholar
Chhaochharia, V.; Grinstein, Y.; Grullon, G.; and Michaely, R.. “Product Market Competition and Agency Conflicts: Evidence from the Sarbanes Oxley Law.” Johnson School Research Paper Series No. 18-2012, Cornell University (2012).Google Scholar
Cleary, S.“The Relationship Between Firm Investment and Financial Status.” Journal of Finance, 54 (1999), 673–692.CrossRefGoogle Scholar
Coffee, J.“The Future as History: The Prospects for Global Convergence in Corporate Governance and its Implications.” Northwestern University Law Review, 93 (1999), 641–708.Google Scholar
Cremers, K. J. M., and Nair, V. B.. “Governance Mechanisms and Equity Prices.” Journal of Finance, 60 (2005), 2859–2894.Google Scholar
Cremers, K. J. M.; Nair, V. B.; and Peyer, U.. “Takeover Defenses and Competition.” Journal of Empirical Legal Studies, 5 (2008), 791–818.Google Scholar
Denis, K. D., and McConnell, J. J.. “International Corporate Governance.” Journal of Financial and Quantitative Analysis, 38 (2003), 1–36.CrossRefGoogle Scholar
Djankov, S.; La Porta, R.; Lopez-de-Silanes, F.; and Shleifer, A.. “The Law and Economics of Self-Dealing.” Journal of Financial Economics, 88 (2008), 430–465.CrossRefGoogle Scholar
Doidge, C.; Karolyi, G. A.; and Stulz, R.. “Why Do Countries Matter So Much for Corporate Governance.” Journal of Financial Economics, 86 (2007), 1–39.CrossRefGoogle Scholar
Durnev, A., and Kim, H.. “To Steal or Not To Steal: Firm Attributes, Legal Environment, and Valuation.” Journal of Finance, 60 (2005), 1461–1493.CrossRefGoogle Scholar
Fazzari, S. M.; Hubbard, R. G.; and Petersen, B. C.. “Financing Constraints and Corporate Investment.” Brookings Papers on Economic Activity, 2 (1988), 141–195.CrossRefGoogle Scholar
Gill, A.“Corporate Governance in Emerging Markets: Saints and Sinners, Who’s Got Religion?” Credit Lyonnais Security Asia (2001).Google Scholar
Gill, A.“Corporate Governance in Emerging Markets: Make Me Holy … But Not Yet!” Credit Lyonnais Security Asia (2002).Google Scholar
Giroud, X., and Mueller, H. M.. “Does Corporate Governance Matter in Competitive Industries?” Journal of Financial Economics, 95 (2010), 312–331.Google Scholar
Giroud, X., and Mueller, H. M.. “Corporate Governance, Product Market Competition, and Equity Prices.” Journal of Finance, 66 (2011), 563–600.CrossRefGoogle Scholar
Gompers, P. A.; Ishii, J. L.; and Metrick, A.. “Corporate Governance and Equity Prices.” Quarterly Journal of Economics, 118 (2003), 107–155.CrossRefGoogle Scholar
Guadalupe, M., and Pérez-González, F.. “Competition and Private Benefits of Control.” Working Paper, Stanford University (2011).CrossRefGoogle Scholar
Hart, O. D.“The Market Mechanism as an Incentive Scheme.” Bell Journal of Economics, 14 (1983), 366–382.Google Scholar
Hugill, A., and Siegel, J.. “Which Does More to Determine the Quality of Corporate Governance in Emerging Economies, Firms or Countries.” Harvard Business School Working Paper No. 13–055 (2014).Google Scholar
Kaplan, S. N., and Zingales, L.. “Do Investment–Cash Flow Sensitivities Provide Useful Measures of Financing Constraints?” Quarterly Journal of Economics, 112 (1997), 169–215.CrossRefGoogle Scholar
Karuna, C.“Industry Product Market Competition and Internal Corporate Governance.” Working Paper, University of California at Irvine (2010).Google Scholar
Khanna, T.; Kogan, J.; and Palepu, K.. “Globalization and Similarities in Corporate Governance: A Cross-Country Analysis.” Review of Economics and Statistics, 88 (2006), 69–90.CrossRefGoogle Scholar
Khanna, T.; Palepu, K.; and Srinivasan, S.. “Disclosure Practices of Foreign Companies Interacting with US Markets.” Journal of Accounting Research, 42 (2004), 475–508.CrossRefGoogle Scholar
Klapper, L., and Love, I.. “Corporate Governance, Investor Protection and Performance in Emerging Markets.” Journal of Corporate Finance, 10 (2004), 703–728.CrossRefGoogle Scholar
La Porta, R.; Lopez-de-Silanes, F.; Shleifer, A.; and Vishny, R.. “Investor Protection and Corporate Governance.” Journal of Financial Economics, 58 (2000), 3–27.CrossRefGoogle Scholar
Lins, K.“Equity Ownership and Firm Value in Emerging Market.” Journal of Financial and Quantitative Analysis, 38 (2003), 159–184.CrossRefGoogle Scholar
Masulis, R. W.; Wang, C.; and Xie, F.. “Corporate Governance and Acquirer Returns.” Journal of Finance, 62 (2007), 1851–1889.Google Scholar
McLean, R. D.; Zhang, T.; and Zhao, M.. “Why Does the Law Matter? Investor Protection and Its Effects on Investment, Finance, and Growth.” Journal of Finance, 67 (2012), 313–350.CrossRefGoogle Scholar
Mian, A. R., and Sufi, A.. “What Explains the 2007–2009 Drop in Employment?” Econometrica, 82 (2014), 2197–2223.Google Scholar
Morck, R.; Wolfenzon, D.; and Yeung, B.. “Corporate Governance, Economic Entrenchment, and Growth.” Journal of Economic Literature, 43 (2005), 657–722.Google Scholar
Rajan, R., and Zingales, L.. “Financial Dependence and Growth.” American Economic Review, 88 (1998), 559–586.Google Scholar
Shleifer, A., and Vishny, R.. “A Survey of Corporate Governance.” Journal of Finance, 52 (1997), 737–783.CrossRefGoogle Scholar
Shleifer, A., and Wolfenzon, D.. “Investor Protection and Equity Markets.” Journal of Financial Economics, 66 (2002), 3–27.Google Scholar
S&P Dow Jones Indices. “S&P Global 1200 Methodology.” www.spdji.com(2011).Google Scholar
S&P Dow Jones Indices. “S&P Global BMI, S&P/IFCI Methodology.” www.spdji.com(2014).Google Scholar
Standard & Poor’s. “Transparency and Disclosure: Overview of Methodology and Study Results – United States.” www.standardandpoors.com(2002).Google Scholar
World Bank. World Development Indicators 2000. Washington, DC: The World Bank(2000).Google Scholar
Supplementary material: File

Cosset supplementary material

Cosset supplementary material 1

Download Cosset supplementary material(File)
File 45.9 KB