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Corporate Governance and Regulation: Can There Be Too Much of a Good Thing?

Author

Listed:
  • Stijn Claessen
  • Valentina Bruno
Abstract
For a large number of companies from different countries, we analyze how company corporate governance practices and country regulatory regimes interact in terms of company valuation. We confirm that corporate governance plays a crucial role in efficient company monitoring and shareholder protection, and consequently positively impacts valuation. We find substitution in valuation impact between corporate governance measures at the company and country level, with a possibility of over-regulation. Corporate governance appears also more valuable for companies that rely heavily on external financing, consistent with the hypothesis that corporate governance main role is to protect external financiers.

Suggested Citation

  • Stijn Claessen & Valentina Bruno, 2006. "Corporate Governance and Regulation: Can There Be Too Much of a Good Thing?," FMG Discussion Papers dp574, Financial Markets Group.
    • Handle: RePEc:fmg:fmgdps:dp574
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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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