National Culture and the Value Implication of Corporate Governance
74 Pages Posted: 24 Feb 2014 Last revised: 19 Dec 2017
Date Written: December 18, 2017
We examine why corporate governance varies widely across countries and across firms, and why such variation matters. Using a proprietary database from Governance Metrics International on corporate governance practices across a large number of countries and firms for 2006-2011 and employing a hierarchical linear model specification, we find that the national cultural dimension of individualism is positively associated with, whereas the national cultural dimension of uncertainty avoidance is negatively associated with, firm-level corporate governance scores. Within countries, there is a positive association between firm-level corporate governance scores and firm value; however, across countries, the association is negative or zero.
Keywords: corporate governance; firm value; hierarchical linear model; individualism; national culture; uncertainty avoidance
JEL Classification: G18, G31, G32
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