The Globalization of Stock Markets and Convergence in Corporate Governance

Abstract

We examine the governance practices, ownership structures, and analyst followings of US-listed firms from the UK, France, Germany, Japan, Chile, and Israel, and find little evidence of convergence toward a US model of corporate governance. In the size of their boards, the proportion of inside directors, and the propensity to separate CEO and Chairman roles, US-listed firms are largely indistinguishable their domestic counterparts, although Israeli firms are an important exception. On average, US-listed foreign firms have smaller analyst followings, more concentrated ownership, and attract less institutional ownership than comparable US firms. Few US-listed foreign firms recruit directors of American firms, although some inherit them via acquisitions of US firms; those foreign firms that do have American directors attract larger analyst followings on average, file more 6Ks, and are more likely to make their disclosures available electronically. The results suggest that while new firms outside the US that anticipate listing in the US may adopt American-style governance practices, existing firms are unlikely to do so even after a US listing.