Corporate Governance and Regulation: Can There be too Much of a Good Thing?

Abstract:     
For a large number of companies from different countries, we analyze how company corporate governance practices and country regulatory regimes interact in terms of company valuation. We confirm that company corporate governance practices play a crucial role in efficient company functioning and shareholder protection, and consequently positively impact valuation. We find little valuation impact from corporate governance measures at the country level, and evidence of possible over-regulation. Corporate governance appears more valuable for large companies and those that rely more heavily on external financing, consistent with the hypothesis that the main role of corporate governance is to protect external financiers.

Keywords: Corporate governance practices, Regulatory regimes, Company valuation

JEL Classifications: G34

Working Paper Series