Product Market Competition, Corporate Governance and Legal Origin
37 Pages Posted: 26 Apr 2012
Date Written: March 8, 2012
Using the persistence of corporate profits as a measure of the intensity of product market competition in 19 countries for the period 1995-2005, we find that civil law systems are more competitive, in this sense, than common law ones. Greater shareholder protection increases competition between firms in common law countries, but reduces it in civil law ones. We conclude that shareholder rights act as complements to product market competition in the common law world but not in the civil law world, and explain this result by reference to the common-law origins of shareholder-orientated corporate governance.
Keywords: legal origin, corporate governance, shareholder protection, product market competition, persistence of profits
JEL Classification: K22, G28, L22, L25
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