Corporate Governance and Regulation: Can There Be Too Much of a Good Thing?

For a large number of companies from a cross-section of countries, we analyze how company corporate governance practices, country regulatory regimes and their interaction affect companies’ valuation. We confirm that practices are crucial for efficient company functioning and shareholder protection, and consequently positively impact valuation. We find little positive valuation impact from country level rules, but rather evidence of companies with good practices being over-regulated. Corporate governance appears more valuable for companies that naturally rely more on external financing, consistent with corporate governance protecting external financiers, and for large companies, consistent with there being (fixed) costs to corporate governance compliance.