Work

The Political Economy of Corporate Governance

Year: 2005

Type: article

Abstract: We analyze the political determinants of investor and employment protection. Our model predicts that proportional electoral systems are conducive to weaker investor protection and stronger employment protection than majoritarian systems. This prediction is consistent with international panel data evidence. The proportionality of the voting system is significantly and negatively correlated with shareholder protection in a panel of 45 countries, and positively correlated with employment protection in a panel of 21 OECD countries. Other political variables also affect regulatory outcomes, especially for the labor market. The origin of the legal system has some additional explanatory power only for employment protection.

Source: American Economic Review

DOI: 10.1257/0002828054825646

Authors: Marco Pagano, Paolo F Volpin

Institutions: University of Salerno, Centre for Studies in Economics and Finance, University of Naples Federico II, London Business School

Language: English

Topic: Corporate Finance and Governance

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Peace, justice, and strong institutions, Decent work and economic growth

Open Access status: green

Funders: National Science Foundation, European Commission