Business, Management and Accounting
4 years ago

Firms in less investor-friendly countries thrive with high-quality governance practices.

RePEc: Research Papers in Economics
Corporate Stability and Economic Growth
Artyom Durnev, E. Han Kim

Paper Summary

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The article explores why some companies have good governance even when not required by law, and how this affects their value. By studying 859 firms in 27 countries, the researchers found that firms with more growth opportunities, financing needs, and concentrated ownership tend to have better governance practices. These firms are also valued higher in the stock market. Interestingly, these relationships are stronger in countries with less investor-friendly legal environments, showing that companies can adapt to establish efficient governance practices.