What Matters in Governance?

In the past 20 years, many corporate law scholars have come to the view that governance arrangements protecting incumbents from removal are what really matter for firm value, arguing that such arrangements help entrench managers and harm shareholders. A major factor supporting this view has been the rise of empirical studies using corporate governance indices to measure a firm’s governance quality. Providing seemingly objective evidence that protecting incumbents from removal reduces firm value, these studies have encouraged the idea that good corporate governance is equivalent to stronger shareholder rights.

In our recent article, we challenge this idea, presenting new empirical … Read more