Corporate Governance and the Returns on Investment

Posted: 15 Sep 2004

See all articles by Klaus Peter Gugler

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

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 determinants of investment performance. 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.

JEL Classification: G32, G34, L21

Suggested Citation

Gugler, Klaus and Mueller, Dennis C. and Yurtoglu, B. Burcin, Corporate Governance and the Returns on Investment. Journal of Law and Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=590343

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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