Corporate Governance, Norms and Practices

49 Pages Posted: 28 Feb 2007 Last revised: 16 Oct 2007

See all articles by Vidhi Chhaochharia

Vidhi Chhaochharia

University of Miami - Department of Finance

Luc Laeven

European Central Bank (ECB); Centre for Economic Policy Research (CEPR)

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Date Written: October 8, 2007


We evaluate the impact of firm-level corporate governance provisions on the valuation of firms in a large cross-section of countries. Unlike previous work, we differentiate between minimally accepted governance attributes that are satisfied by all firms in a given country and governance attributes that are adopted at the firm level. This approach allows us to differentiate between firm-level and country-level corporate governance. Despite the costs associated with improving corporate governance at the firm level, we find that many firms choose to adopt governance provisions beyond those that are adopted by all firms in the country, and that these improvements in corporate governance are positively associated with firm valuation. Our results indicate that the market rewards companies that are prepared to adopt governance attributes beyond those required by laws and common corporate practices in the home country.

Keywords: Corporate governance, Firm valuation, Minimum standards

JEL Classification: G3

Suggested Citation

Chhaochharia, Vidhi and Laeven, Luc A., Corporate Governance, Norms and Practices (October 8, 2007). ECGI - Finance Working Paper No. 165/2007, Available at SSRN: or

Vidhi Chhaochharia (Contact Author)

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States

Luc A. Laeven

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314

Centre for Economic Policy Research (CEPR)

United Kingdom

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