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Effect of property rights on the relationship between legal traditions and corporate governance: evidence from the MENA region

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  • Omar Farooq
  • Rouaa AbdelBari

Abstract

Do legal traditions really matter for corporate governance? How do property rights affect the relationship between legal traditions and corporate governance? Using a large dataset from the Middle East and North Africa (MENA) region during the period between 2005 and 2009, we document that differences in legal traditions translate into differences in corporate governance mechanisms. Our results show that the common law countries have better governance mechanisms relative to the civil law countries. We show lower ownership concentration, higher likelihood of appointing one of the big-four auditors, and more transparency for firms in the common law countries relative to firms in the civil law countries in the MENA region. Interestingly, our results show that above relationships hold only in weak property rights regimes. As property rights become strong, the difference between corporate governance mechanisms across the common and the civil law countries disappear.

Suggested Citation

  • Omar Farooq & Rouaa AbdelBari, 2013. "Effect of property rights on the relationship between legal traditions and corporate governance: evidence from the MENA region," International Journal of Business Governance and Ethics, Inderscience Enterprises Ltd, vol. 8(3), pages 224-241.
    • Handle: RePEc:ids:ijbget:v:8:y:2013:i:3:p:224-241
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