One Size Does Not Fit All, After All: Evidence from Corporate Governance
49 Pages Posted: 3 Mar 2006
Date Written: January 15, 2007
We identify well-governed companies by accounting for heterogeneity in their governance choices by using a unique dataset. We find that companies that depart from governance best practice because of genuine circumstances outperform all others and cannot be considered badly-governed. On the contrary, we find that mechanical adherence to best practice does not always lead to superior performance. We thus argue that flexibility in corporate governance regulation plays a crucial role, because companies are not homogenous entities.
Keywords: Corporate Governance, Empirical Finance, Code of Best Practice, Flexible Regulation, UK
JEL Classification: G34, G38, K29
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