Abstract
Viewing the arche of good corporate governance as strong minority investor protection, this paper seeks to understand how the societal institutions influence whether firms orient their governance structure towards protecting minority investors. Prior work approaching corporate governance from an agency theoretic perspective tends to operationalize institutions too simplistically, imposing the assumption that laws and the rule-of-law impact firm- level investment in investor protection equally. Furthermore, these same studies ignore the role societal norms may play in firm-level governance. Using data from 21 developed countries, I find that de facto and de jure institutions uniquely impact a firm’s corporate governance through both direct effects and by moderating the impact of agency costs on a firm’s investment in investor protection.
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