Differences in Governance Practices between U . S . and Foreign Firms : Measurement , Causes , and Consequences

  title={Differences in Governance Practices between U . S . and Foreign Firms : Measurement , Causes , and Consequences},
  author={Reena Aggarwal and Ren{\'e} Stulz and Rohan G. Williamson},
We construct a firm-level governance index increasing in value as minority shareholders are better protected. Compared to U.S. matching firms, only 12.68% of foreign firms have a higher index. The value of foreign firms falls as their index decreases relative to the index of matching U.S. firms. Our results suggest that lower country-level investor protection and other country characteristics make it suboptimal for foreign firms to invest as much in governance as U.S. firms do. Overall, we find… CONTINUE READING
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