Corporate Governance Mechanisms: A Plea for Less Code of Good Governance and More Market Control

Abstract

This paper provides a critical comparative analysis of corporate governance mechanisms in market-oriented (Anglo-Saxon) and large shareholder-oriented (Continental European) systems of corporate governance. Deficiencies in shareholder protection in the legal systems of both corporate governance systems have been addressed through the use of codes of good governance, a set of norms that regulate the behaviour and structure of the board of directors. However, the lower enforceability of norms in Continental Europe limits the applicability of such codes. Therefore, we argue that in Continental Europe, rather than promoting codes of good governance, it is necessary to expand market control mechanisms to facilitate the maximisation of firm value.