An Analysis of Enabling vs. Mandatory Corporate Governance Structures Post Sarbanes-Oxley
36 Pages Posted: 8 May 2005
I argue that firms have incentives to adopt corporate governance practices in the absence of a legal requirement to do so. I further contend that a partially enabling governance regime, and particularly one coupled with mandatory disclosure of a firm's governance practices, is likely to yield a high level of compliance at lower direct costs to the issuer than a wholly mandatory regime. While a wholly mandatory structure may yield slightly better compliance, its other benefits are uncertain and its costs are likely much higher. I seek to push the boundaries of existing comparative corporate governance scholarship by arguing that the enabling/mandatory dichotomy informs analyses of corporate governance regimes across countries.
Keywords: Corporate, governance, mandatory, voluntary
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