Contractual Corporate Governance

38 Pages Posted: 22 Apr 2008 Last revised: 20 Feb 2009

See all articles by Marc Goergen

Marc Goergen

IE Business School, IE University; European Corporate Governance Institute (ECGI)

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Date Written: April 1, 2008

Abstract

Companies have the choice to deviate from their national corporate governance standards by opting into another system. They can do so via contractual devices - such as cross-border mergers and acquisitions, (re)incorporations, and cross-listings - which enable firms to choose their preferred level of investor protection and regulation. This paper reviews these three main contractual governance devices, their effect on value, and whether their adoption by firms induces a race to the bottom or a race to the top. Indeed, firms may opt for less shareholder-orientation or investor protection shareholder-expropriation hypothesis) rather than for more stringent rules that require firms to focus on shareholder value (bonding hypothesis).

Keywords: Contractual corporate governance, corporate governance regulation, cross-border mergers and acquisitions, cross-listings, reincorporations, shareholder protection, creditor protection, spillover effects

JEL Classification: G3, G34, G32, G38, K2

Suggested Citation

Goergen, Marc and Renneboog, Luc, Contractual Corporate Governance (April 1, 2008). Journal of Corporate Finance, July 2008; TILEC Discussion Paper No. 2008-015; CentER Discussion Paper Series No. 2008-41; ECGI - Finance Working Paper No. 205/2008. Available at SSRN: https://ssrn.com/abstract=1123504

Marc Goergen (Contact Author)

IE Business School, IE University ( email )

Finance Department
Maria de Molina, 12
Madrid, 28006
Spain

HOME PAGE: http://www.ie.edu/business-school/faculty-and-research/faculty/marc-goergen/

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Luc Renneboog

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

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