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Corporate Governance and Development


  • Stijn Claessens


The literature shows that good corporate governance generally pays--for firms, for markets, and for countries. It is associated with a lower cost of capital, higher returns on equity, greater efficiency, and more favorable treatment of all stakeholders, although the direction of causality is not always clear. The law and finance literature has documented the important role of institutions aimed at contractual and legal enforcement, including corporate governance, across countries. Using firm-level data, researchers have documented relationships between countries' corporate governance frameworks on the one hand and performance, valuation, the cost of capital, and access to external financing on the other. Given the benefits of good corporate governance, firms and countries should voluntarily reform more. Resistance by entrenched owners and managers at the firm level and political economy factors at the level of markets and countries partly explain why they do not. Copyright 2006, Oxford University Press.

Suggested Citation

  • Stijn Claessens, 2006. "Corporate Governance and Development," World Bank Research Observer, World Bank Group, vol. 21(1), pages 91-122.
  • Handle: RePEc:oup:wbrobs:v:21:y:2006:i:1:p:91-122

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    References listed on IDEAS

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    Cited by:

    1. Tan, Monica & Liu, Bin, 2016. "CEO's managerial power, board committee memberships and idiosyncratic volatility," International Review of Financial Analysis, Elsevier, vol. 48(C), pages 21-30.
    2. Bruno, Valentina & Claessens, Stijn, 2010. "Corporate governance and regulation: Can there be too much of a good thing?," Journal of Financial Intermediation, Elsevier, vol. 19(4), pages 461-482, October.
    3. repec:rss:jnljef:v2i3p1 is not listed on IDEAS
    4. Michael, Bryane & Goo, Say-Hak, 2016. "The Value of the Corporate Governance Canon on Chinese Companies," EconStor Preprints 173675, ZBW - German National Library of Economics.
    5. Sándor Gardó, 2010. "Bank Governance and Financial Stability in CESEE: A Review of the Literature," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 6-31.
    6. Claessens, Stijn & Perotti, Enrico, 2007. "Finance and inequality: Channels and evidence," Journal of Comparative Economics, Elsevier, vol. 35(4), pages 748-773, December.
    7. Salim Chahine & Assem Safieddine, 2011. "Is corporate governance different for the Lebanese banking system?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 15(2), pages 207-226, May.
    8. Mirela MATEI, 2008. "Aspects Regarding The Development Of Bucharest Stock Exchange," Romanian Journal of Economics, Institute of National Economy, vol. 27(2(36)), pages 145-159, December.
    9. Georgeta VINTILA & Florinita DUCA, 2014. "Corporate Governance at the Influence of the Corporate Performance? Empirical Evidence on Companies Listed on Bucharest Stock Exchange," Romanian Statistical Review Supplement, Romanian Statistical Review, vol. 62(4), pages 64-73, April.
    10. Avinash Dixit, 2007. "Evaluating Recipes for Development Success," World Bank Research Observer, World Bank Group, vol. 22(2), pages 131-157, June.
    11. Mediha Mezhoud & Asma Sghaier & Adel Boubaker, 2017. "The Impact of Internal Governance Mechanisms on the Share Price Volatility of Listed Companies in Paris Stock Exchange," Bulletin of Applied Economics, Risk Market Journals, vol. 4(1), pages 1-12.
    12. repec:pcz:journl:v:6:y:2012:i:1:p:33-44 is not listed on IDEAS
    13. Olga Lazareva & Andrei Rachinsky & Sergey Stepanov, 2008. "Corporate Governance, Ownership Structures and Investment in Transition Economies: the Case of Russia, Ukraine and Kyrgyzstan," Working Papers w0119, Center for Economic and Financial Research (CEFIR).
    14. Friedman, Felice B. & Grose, Claire, 2006. "Promoting access to primary equity markets : a legal and regulatory approach," Policy Research Working Paper Series 3892, The World Bank.
    15. Quôc Thai Huynh, 2010. "Les déterminants de l’activisme des actionnaires minoritaires:insuffisance de gouvernance affichée ou de résultats financiers?," Revue Finance Contrôle Stratégie,, vol. 13(3), pages 95-114., September.
    16. Harabi, Najib, 2007. "State of Corporate Governance in Arab Countries: An Overview," MPRA Paper 4566, University Library of Munich, Germany.
    17. Ruiz-Porras, Antonio & Lopez-Mateo, Celina, 2010. "The separation of ownership and control and investment decisions in Mexican manufacturing firms," MPRA Paper 25237, University Library of Munich, Germany.
    18. repec:onb:oenbwp:y:2010:i:1:b:1 is not listed on IDEAS
    19. repec:eco:journ1:2017-05-2 is not listed on IDEAS
    20. Claessens, Stijn, 2017. "Regulation and structural change in financial systems," CEPR Discussion Papers 11822, C.E.P.R. Discussion Papers.
    21. Puan Yatim & Takiah Mohd Iskandar & Elsie Nga, 2016. "Board attributes and foreign shareholdings in Malaysian listed firms," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 20(1), pages 147-178, March.
    22. repec:col:000180:015754 is not listed on IDEAS
    23. Munisi, Gibson & Randøy, Trond, 2013. "Corporate governance and company performance across Sub-Saharan African countries," Journal of Economics and Business, Elsevier, vol. 70(C), pages 92-110.

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