IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Corporate Governance, Capital MarketDiscipline and the Returns on Investment

  • Klaus Gugler
  • Dennis C. Mueller
  • B. Burcin Yurtoglu

We analyze the impact of corporate governance institutions, ownership structures andexternal capital market constraints on company returns on investment by using a sampleof more than 19,000 companies from 61 countries across the world. We show that (1) ofthese three sets of institutions, the origin of a country’s legal system proves to be themost important. Companies in countries with English-origin legal systems earn returnson investment that are at least as large as the cost of capital. (2) Differences ininvestment performance related to a country’s legal system dominate differences relatedto ownership structure. (3) Strong external capital markets improve the investmentperformance of companies. ZUSAMMENFASSUNG - (Corporate Governance, Kapitalmarktdisziplinierung und die Renditen vonUnternehmensinvestitionen) Dieses Papier analysiert den Einfluss von Corporate Governance Institutionen, Eigentümerstrukturen und externen Kapitalmärkten auf die Renditen von Investitionen für ein Sample von mehr als 19.000 Unternehmen aus 61 Ländern weltweit. Wir zeigen, dass von diesen drei Institutionen (1) die Herkunft des Rechtssystems eines Landes der wichtigste Faktor ist. Unternehmen in Ländern mit Rechtssystemen englischer Herkunft verdienen Renditen, die die Kapitalkosten im Durchschnitt abdecken. (2) Unterschiede im Rechtssystem eines Landes dominieren Unterschiede in der Eigentümerstruktur. (3) Funktionierende externe Kapitalmärkte verbessern die Performance von Investitionen.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://skylla.wz-berlin.de/pdf/2001/iv01-25.pdf
Download Restriction: no

Paper provided by Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) in its series CIG Working Papers with number FS IV 01-25.

as
in new window

Length: 59 pages
Date of creation: Dec 2001
Date of revision:
Publication status: Published under the title "Corporate Governance and the Returns on Investment" in the Journal of Law and Economics , Vol. 47, 2004, pp. 589-633.
Handle: RePEc:wzb:wzebiv:fsiv01-25
Contact details of provider: Postal:
Reichpietschufer 50, 10785 Berlin, Germany

Phone: (++49)(30) 25491-441
Fax: (++49)(30) 25491-442
Web page: http://www.wzb.eu/mp/wiw/default.en.htm
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Dennis C. Mueller & B. Burcin Yurtoglu, 2000. "Country Legal Environments and Corporate Investment Performance," German Economic Review, Verein für Socialpolitik, vol. 1(2), pages 187-220, 05.
  2. Larry H. P. Lang & Mara Faccio & Leslie Young, 2001. "Dividends and Expropriation," American Economic Review, American Economic Association, vol. 91(1), pages 54-78, March.
  3. Raghuram G. Rajan & Luigi Zingales, 1996. "Financial Dependence and Growth," NBER Working Papers 5758, National Bureau of Economic Research, Inc.
  4. Levine, Ross & Zervos, Sara, 1996. "Stock markets, banks, and economic growth," Policy Research Working Paper Series 1690, The World Bank.
  5. Robert J. Shiller, 1980. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," NBER Working Papers 0456, National Bureau of Economic Research, Inc.
  6. Gugler, Klaus & Yurtoglu, B. Burcin, 2003. "Corporate governance and dividend pay-out policy in Germany," European Economic Review, Elsevier, vol. 47(4), pages 731-758, August.
  7. Takeo Hoshi & Anil Kashyap & David Scharfstein, 1991. "Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 33-60.
  8. Doidge, Craig & Karolyi, G. Andrew & Stulz, Rene M., 2004. "Why are foreign firms listed in the U.S. worth more?," Journal of Financial Economics, Elsevier, vol. 71(2), pages 205-238, February.
  9. RAFAEL LaPORTA & FLORENCIO LOPEZ-de-SILANES & ANDREI SHLEIFER & ROBERT W. VISHNY, . "Legal Determinants of External Finance,"," CRSP working papers 324, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
  10. A Cosh & P Guest & A Hughes, 2001. "Managerial Discretion and Takeover Performance," ESRC Centre for Business Research - Working Papers wp216, ESRC Centre for Business Research.
  11. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert Vishny, 1998. "Agency Problems and Dividend Policies Around the World," NBER Working Papers 6594, National Bureau of Economic Research, Inc.
  12. Grabowski, Henry G & Mueller, Dennis C, 1975. "Life-Cycle Effects on Corporate Returns on Retentions," The Review of Economics and Statistics, MIT Press, vol. 57(4), pages 400-409, November.
  13. Claessens, Stijn & Djankov, Simeon & Lang, Larry H. P., 2000. "The separation of ownership and control in East Asian Corporations," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 81-112.
  14. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation : An empirical analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 293-315, January.
  15. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
  16. Steven M. Fazzari & R. Glenn Hubbard & BRUCE C. PETERSEN, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
  17. Baumol, William J, et al, 1970. "Earnings Retention, New Capital and the Growth of the Firm," The Review of Economics and Statistics, MIT Press, vol. 52(4), pages 345-55, November.
  18. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  19. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Law and Finance," Working Paper 19451, Harvard University OpenScholar.
  20. Gugler, Klaus (ed.), 2001. "Corporate Governance and Economic Performance," OUP Catalogue, Oxford University Press, number 9780199245703, December.
  21. Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation," Scholarly Articles 29407535, Harvard University Department of Economics.
  22. Fabio Schiantarelli & Alessandro Sembenelli, 2000. "Form of Ownership and Financial Constraints:Panel Data Evidence From Flow of Funds and Investment Equations," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 27(2), pages 175-192, June.
  23. Grabowski, Henry G & Mueller, Dennis C, 1972. "Managerial and Stockholder Welfare Models of Firm Expenditures," The Review of Economics and Statistics, MIT Press, vol. 54(1), pages 9-24, February.
  24. Shinnear, Reuel, et al, 1989. "Estimation of the Economic Rate of Return for Industrial Companies," The Journal of Business, University of Chicago Press, vol. 62(3), pages 417-45, July.
  25. Shin, Hyun-Han & Park, Young S., 1999. "Financing constraints and internal capital markets: Evidence from Korean 'chaebols'," Journal of Corporate Finance, Elsevier, vol. 5(2), pages 169-191, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wzb:wzebiv:fsiv01-25. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jennifer Rontganger)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.