The Role of Self-Regulation in Corporate Governance: Evidence and Implications from the Netherlands

Abstract

This paper assesses the effectiveness of The Netherlands' private sector self-regulation initiative ("The Peters Committee") to improve corporate governance. We compare corporate governance characteristics and examine the relation between firm value and these characteristics before and after the private sector initiative. We find the private sector initiative had no substantive effect on corporate governance characteristics or their relationship with firm value. Based on event study results, we document the market's skepticism about the ultimate success of self-regulation of corporate governance practices in The Netherlands. An exception to this overall conclusion is the market for new listings. Our results on the outcome of The Netherlands self-regulation initiative suggests little can be expected from initiatives that rely on monitoring without enforcement (e.g., the similar or weaker initiatives in other European Union countries).

Keywords: International economics, financial economics, law and economics, corporate governance

JEL Classification: G3, L51