Corporate Governance, Competition, and Performance

Corporate governance has become a subject of active academic and policy debate throughout the world. In the United Kingdom and the United States of America, there is much discussion of the deficiencies of the market system in delivering effective governance. In continental Europe, there is a concern that existing systems of governance are stifling innovation and growth. In Eastern Europe, privatization has given way to questions about the form in which private enterprises should be governed. China is experimenting with methods of corporate governance which attempt to blend some of the features of market systems with state ownership of enterprises. Despite the intense debate, evidence on the effects of different governance systems is still sparse. Corporate governance has become a subject on which opinion has drowned fact. The purpose of this paper is to review what is known about the relation of corporate governance and corporate performance.