Corporate Governance and Ownership: Evidence from a Non-Mandatory Regulation

42 Pages Posted: 4 Sep 2012 Last revised: 24 Jul 2014

See all articles by Sridhar Arcot

Sridhar Arcot

ESSEC Business School - Finance Department

Valentina Bruno

American University - Department of Finance and Real Estate

Date Written: July 18, 2014

Abstract

We study the governance choices of firms in a voluntary regulatory regime where we can directly observe the impact of ownership on corporate governance practices pertaining to the composition of the board of directors. We find that firms with a dominant shareholder are more likely to deviate from standards of best practice in corporate governance. However, lesser governance standards in firms where a dominant shareholder is present are not associated with lower performance. In contrast, governance practices and disclosures matter for performance in widely-held firms because they alleviate monitoring and free-rider problems. Our results suggest that the impact of corporate governance practices is the result of complex governance interdependences.

Keywords: corporate governance, dominant shareholders, code of best practice

JEL Classification: G32, G34, G38, K22

Suggested Citation

Arcot, Sridhar and Bruno, Valentina Giulia, Corporate Governance and Ownership: Evidence from a Non-Mandatory Regulation (July 18, 2014). Available at SSRN: https://ssrn.com/abstract=2140928 or http://dx.doi.org/10.2139/ssrn.2140928

Sridhar Arcot

ESSEC Business School - Finance Department ( email )

Avenue Bernard Hirsch
BP 105 Cergy Cedex, 95021
France

Valentina Giulia Bruno (Contact Author)

American University - Department of Finance and Real Estate ( email )

Kogod School of Business
4400 Massachusetts Ave., N.W.
Washington, DC 20016-8044
United States

HOME PAGE: http://www.american.edu/kogod/faculty/bruno.cfm

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