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The Role of Self-Regulation in Corporate Governance: Evidence from the Netherlands

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  • Jong, A. de
  • DeJong, D.V.
  • Mertens, G.M.H.
  • Wasley, C.

    (Tilburg University, Center for Economic Research)

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    Abstract

    The purpose of this paper is to gather evidence on the success of market forces in promoting investor interests through self-regulation.Corporate governance is a complex mechanism design problem that is both economic and legal/political based.As such there is great interest in whether (and when) market forces alone are sufficient to prompt change, and whether (and when) additional legal/political actions are required to write and enforce contracts between the owners and managers of capital.The Netherlands provides an excellent opportunity to gather such information.In 1996, a private sector Committee was formed to initiate debate and change in the balance of power between a company's management and investors.In 1997, the Committee issued its recommendations and one year later the Committee initiated a project to assess the impact of the report.We identify the corporate governance variables that are linked to firm value and assess the impact of the committee's recommendations on the identified variables.Finally, we use event study techniques to assess investors reactions to the various events associated with the evolution of corporate governance practices in the Netherlands during this period.

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    Bibliographic Info

    Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2000-59.

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    Date of creation: 2000
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    Handle: RePEc:dgr:kubcen:200059

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    Web page: http://center.uvt.nl

    Related research

    Keywords: international economics; financial economics; law and economics; corporate governance;

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    References

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    3. Eisenberg, Theodore & Sundgren, Stefan & Wells, Martin T., 1998. "Larger board size and decreasing firm value in small firms," Journal of Financial Economics, Elsevier, vol. 48(1), pages 35-54, April.
    4. Kumar, Raman & Sopariwala, Parvez R., 1992. "The Effect of Adoption of Long-Term Performance Plans on Stock Prices and Accounting Numbers," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(04), pages 561-573, December.
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    11. Yermack, David, 1996. "Higher market valuation of companies with a small board of directors," Journal of Financial Economics, Elsevier, vol. 40(2), pages 185-211, February.
    12. Mehran, Hamid, 1995. "Executive compensation structure, ownership, and firm performance," Journal of Financial Economics, Elsevier, vol. 38(2), pages 163-184, June.
    13. Jong, A. de, 1999. "An Empirical Analysis of Capital Structure Decisions in Dutch Firms," Open Access publications from Tilburg University urn:nbn:nl:ui:12-80017, Tilburg University.
    14. Loderer, Claudio & Martin, Kenneth, 1997. "Executive stock ownership and performance Tracking faint traces," Journal of Financial Economics, Elsevier, vol. 45(2), pages 223-255, August.
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