International Corporate Governance and Firm Performance: An Empirical Analysis

This paper investigates whether differences in international corporate governance systems affect firm performance. We construct a firm-level panel database from three countries and perform regression analyses that controls for country-specific effects. Our study includes governance characteristics that are present in all of the three countries, but also characteristics that are unique to one of the three countries. For both sets of variables we find that the governance system has an important influence on the governance-performance relation. First, for the characteristics present in all three countries, we find significant differences between the countries. Second, the characteristics that are unique to a country also have significant influence on performance. These findings prove that empirical findings in one specific governance system cannot be generalized into other systems. Moreover, country-specific features appear to be highly relevant and should be taken into account in comparative studies.