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Differences in Governance Practices between U.S. And Foreign Firms: Measurement, Causes, and ConsequencesReena AggarwalGeorgetown University - Robert Emmett McDonough School of Business Isil ErelOhio State University (OSU) - Department of Finance Rene M. Stulzaffiliation not provided to SSRN Rohan WilliamsonGeorgetown University - McDonough School of Business August 2009 The Review of Financial Studies, Vol. 22, Issue 8, pp. 3131-3169, 2009 Abstract: We construct a firm-level governance index that increases with minority shareholder protection. Compared with U.S. matching firms, only 12.68% of foreign firms have a higher index. The value of foreign firms falls as their index decreases relative to the index of matching U.S. firms. Our results suggest that lower country-level investor protection and other country characteristics make it suboptimal for foreign firms to invest as much in governance as U.S. firms do. Overall, we find that minority shareholders benefit from governance improvements and do so partly at the expense of controlling shareholders.
Keywords: G32, G34, G38 Accepted Paper SeriesDate posted: August 5, 2009Suggested CitationContact Information
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