Corporate Governance and Ownership: Evidence from a Non-Mandatory Regulation

We study the governance choices of firms in a voluntary regulatory regime. We find that firms with a dominant shareholder are more likely to deviate from standards of best practice in corporate governance. However, lesser governance standards in firms where a dominant shareholder is present are not associated with lower performance. Our results suggest that standard governance practices that mostly empower the board of directors with a monitoring role are less relevant when the large shareholder is the monitor in place. Overall, we argue that the corporate governance of firms is the result of complex interdependences that go beyond a one-size-fits-all model.