Corporate Governance and the Returns on Investment
AbstractWe 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 determinant of investment performance. Companies in countries with a legal system of English origin 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 that are related to a country's legal system dominate differences that are related to ownership structure. We also present considerable evidence that managerial entrenchment worsens a company's investment performance.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Law and Economics.
Volume (Year): 47 (2004)
Issue (Month): 2 (October)
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Web page: http://www.journals.uchicago.edu/JLE/
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