OECD Corporate Governance Working Papers

ISSN :
2223-0939 (online)
DOI :
10.1787/22230939
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OECD Corporate Governance Working Papers provide timely analysis and information on national and international corporate governance issues and developments, including state ownership and privatisation policies. The working paper series is designed to make select studies by the OECD Corporate Governance Committee, OECD staff members and outside consultants available to a broad audience.
 

Who Cares? Corporate Governance in Today's Equity Markets You or your institution have access to this content

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Author(s):
Mats Isaksson1, Serdar Çelik1
Author Affiliations
  • 1: OECD, France

Publication Date
19 Apr 2013
Bibliographic information
No.:
8
Pages
59
DOI
10.1787/5k47zw5kdnmp-en

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There are two main sources of confusion in the public corporate governance debate. One is the confusion about the role of public policy intervention. The other is a lack of empirical knowledge about the corporate landscape where rules are supposed to be implemented and the functioning of today’s equity markets, where voting rights and cash flow rights are traded. To mitigate some of this confusion, this paper provides both an analytical framework for the role of public policy and a description of the empirical context that influences the conditions for that policy. It underlines the importance of focusing on the overall economic outcome and, in particular, how rules and regulations impact the conditions for companies to grow and create value by accessing public equity markets. In terms of the empirical context, we point to fundamental changes in the functioning of equity markets that may call for a fresh look at the economic effectiveness of corporate governance regulations. Among other things, we document a dramatic shift in listings from developed to emerging markets over the last decade, which means that concentrated ownership at company level has become the dominant form of ownership in listed companies worldwide. We also discuss whether the lack of new listings of smaller companies in developed markets is related to excessive regulatory burdens and unintended consequences of a decade of profound stock market deregulation. The discussion about listings illustrates that corporate governance rules and regulations do not only affect companies that are already listed. From a policy perspective, it is equally important to assess the implications for unlisted companies that may, in the future, require access to public equity markets for growth and job creation. We also document how the lengthened and ever more complex chain of intermediaries between savers and companies may influence the efficiency of capital allocation and the willingness of investors to take an active long-term interest in the companies that they own. It is shown that institutional investors are a highly heterogeneous group and that their willingness and ability to engage in corporate governance primarily depend on the economic incentives that follow from their different business models, investment strategies and trading practices. We provide examples of how regulatory initiatives to increase shareholder engagement may have unintended consequences, and note that the diversity and complexity of the investment chain can render general policies or regulation ineffective.
Keywords:
corporate governance, initial public offerings, shareholders, institutional investors, capital and ownership structure
JEL Classification:
  • G30: Financial Economics / Corporate Finance and Governance / General
  • G32: Financial Economics / Corporate Finance and Governance / Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
  • G34: Financial Economics / Corporate Finance and Governance / Mergers; Acquisitions; Restructuring; Corporate Governance
  • G38: Financial Economics / Corporate Finance and Governance / Government Policy and Regulation