Working Paper: CEPR ID: DP6108
Authors: Valentina Bruno; Stijn Claessens
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.
Keywords: Company Valuation; Corporate Governance Practices; Regulatory Regimes
JEL Codes: G34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| corporate governance (G38) | company valuation (G32) |
| higher levels of board independence (G34) | better performance metrics (C52) |
| independent board committees (G34) | better performance metrics (C52) |
| strong internal governance (G38) | marginal value of external protections (D62) |
| excessive regulation (L51) | company valuation (G32) |
| strong corporate governance practices (G38) | valuation impact from external financing (G32) |
| strong governance structures (G38) | benefit for small companies (L25) |