Accounting Research Center Working Papers,
University of Aarhus, Aarhus School of Business, Department of Business Studies

Abstract: Research Question/Issue: Is the reduction of asymmetric information through Corporate Governance mechanisms more important for some listed companies than for others? The purpose of this study is to examine how differences in "ownership dispersion" and "international orientation" affect the particular use of the Corporate Governance mechanisms "transparency" and "board independence" in listed companies.

Research Findings/Insights: Our findings are based on a Danish dataset which includes 100 listed companies. We find that transparency is a more important Corporate Governance mechanism for companies with an international orientation, while differences in ownership dispersion do not affect the use of this mechanism. In contrast, we find that board independence is a more important Corporate Governance mechanism for companies with dispersed ownership while international orientation has less importance.

Theoretical/Academic Implications: The study contributes to an improved understanding of the circumstantial relationship between good Corporate Governance and good corporate performance. This is important in order to interpret differences in prior research findings and provide insight for the design of future studies of the seemingly endogenous nature of many Corporate Governance relationships.

Practitioner/Policy Implications: The requirement to adhere to the "comply or explain rules" for Corporate Governance has become commonplace for listed companies. The study provides insight into valid reasons for differences in compliance. Regulators and other capital market participants should acknowledge that companies may differ in their use of Corporate Governance mechanisms for various reasons, including differences in ownership dispersion and international orientation

Keywords: Corporate Governance; Transparency; Board Member Independence; Two Tier Board Structure; Ownership Dispersion; Internationalisation

55 pages, August 5, 2008

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