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Corporate Governance and the Returns on Investment

59 Pages Posted: 23 Apr 2003  

Klaus Peter Gugler

Vienna University of Economics and Business; European Corporate Governance Institute (ECGI)

Dennis C. Mueller

University of Vienna - Center for Business Studies - Department of Economics

B. Burcin Yurtoglu

WHU - Otto Beisheim School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: January 2003

Abstract

We analyze the impact of corporate governance institutions and ownership structures on company returns on investment by using a sample of more than 19,000 companies from 61 countries across the world. We show that the origin of a country's legal system proves to be the most important. Companies in countries with English-origin legal systems earn returns on investment that are at least as large as their costs of capital. Companies in all countries with civil law systems earn on average returns on investment below their costs of capital. Furthermore, differences in investment performance related to a country's legal system dominate differences related to ownership structure. We also present considerable evidence that managerial entrenchment worsens a company's investment performance.

Keywords: corporate governance, external capital markets, ownership structure, returns on investment

JEL Classification: G32, G34, L21

Suggested Citation

Gugler, Klaus Peter and Mueller, Dennis C. and Yurtoglu, B. Burcin, Corporate Governance and the Returns on Investment (January 2003). EFA 2002 Berlin Meetings Presented Paper; and ECGI - Finance Working Paper No. 06/2003. Available at SSRN: https://ssrn.com/abstract=299520 or http://dx.doi.org/10.2139/ssrn.299520

Klaus Gugler (Contact Author)

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

HOME PAGE: http://www.wu.ac.at/iqv/mitarbeiter/gugler

European Corporate Governance Institute (ECGI)

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

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

Dennis C. Mueller

University of Vienna - Center for Business Studies - Department of Economics ( email )

BWZ - BrĂ¼nner Str.
A-1010 Vienna
Austria
+43 1 4277 37484 (Phone)
+43 1 4277 37498 (Fax)

HOME PAGE: http://mailbox.univie.ac.at/~muelled2/

B. Burcin Yurtoglu

WHU - Otto Beisheim School of Management ( email )

Chair of Corporate Finance
Burgplatz 2
Vallendar, 56179
Germany
+49 261 6509-721 (Phone)
+49 261 6509-729 (Fax)

HOME PAGE: http://www.whu.edu/forschung/fakultaet/finance-group/corporate-finance/

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