When is Two Really Company? The Effects of Competition and Regulation on Corporate Governance
56 Pages Posted: 26 Mar 2008
Date Written: March 18, 2008
Abstract
In this paper we bring together agency, stakeholder, institutional and resource-dependence theories to study the direct and interactive effects of country regulation and competition on two dimensions of corporate governance: the overall quality of corporate governance of firms in a country, and firm-to-firm variations in corporate governance. Interactive conditions are more representative of the real-world context of corporate governance, and the contradictory pressures that firms face in such interactive conditions are better explained through the use of multiple theories of corporate governance. Using a dataset that spans 15 countries and includes 463 firms, we find that firm corporate governance is better in conditions where either regulation or competition is well-developed, by comparison with interactive conditions. We also find that while regulation enhances within- country convergence, it is likely that competition serves to enhance across-country convergence.
Keywords: Competition, Regulation, firm-level corporate governance, convergence
JEL Classification: G18, G38, G39
Suggested Citation: Suggested Citation
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