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7 J. Corp. L. Stud. 1 (2007)

handle is hein.journals/corplstd7 and id is 1 raw text is: Journal of Corporate Law Studies WHAT DO WE KNOW ABOUT DIFFERENT SYSTEMS OF CORPORATE GOVERNANCE? MARC GOERGEN* Over the last few years, national and international regulators have taken conscious steps to make capital markets-especially those based in Europe-more shareholder-oriented. On one side, these are welcome initiatives as the recent spectacular corporate failures and anecdotal evidence suggest that managers' attitudes definitely need to change and more weight needs to be given to shareholders' concerns. On the other side, there is as yet vegy little research on the benefits and shortcomings of alternative systems of corporate governance. Evidencefrom thefew existing studies is inconclusive as to whether there is an optimal system of corporate governance and whether such a system already exists in a particular country. The move in one particular direction may therefore be far too premature. Further, some of my own research suggests that vegy similar changes in regulation such as changes in takeover regulation-may have very different outcomes depending on the initial corporate ownership and control that prevail in a given country. A. INTRODUCTION The generally accepted definition of corporate governance is that of Andrei Shleifer from Harvard Business School and Robert Vishny from the University of Chicago. According to their definition, corporate governance deals with the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment.' They justify the focus on shareholders by stating that, contrary to other stakeholders, the former have a sunk investment in the company If the firm runs into financial difficulties, shareholders are likely to lose their investment, whereas other stakeholders such as employees can walk away relatively easily The OECD, the World Bank, the European Association of Securities Dealers (the EASD) and the European Commission have adopted the essence of Shleifer * The University of Sheffield Management School, Sheffield, UK, and European Corporate Governance Institute (ECGI), Brussels, Belgium. This paper is based on my inaugural lecture at the University of Sheffield on 22 February 2006. I am grateful to Eilis Ferran (the editor), an anonymous referee, Brian Cheffins, Luc Renneboog and Suzette Rouch-Cordot for comments and suggestions that have helped to improve this paper. I A Shleifer and R Vishny, A Survey of Corporate Governance (1997) 52 Journal of Finance 737. April 2007

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