China is now the world's largest destination of foreign direct investment (FDI), despite assessments highlighting its institutional deficiencies. But this FDI inflow corresponds closely to predicted FDI flows into China from a model that predicts FDI inflow based on government quality indicators...

Control of corporate assets by wealthy families in economies lacking institutional integrity is common. It has negative implications on corporate governance and adverse macroeconomic effects when it extends across a sufficiently large part of the country's corporate sector. Morck and Yeung...

In environments where the legal system and market disciplinary forces are weak to enforce contracts, vertical integration is a means to overcome transaction difficulties. Yet, these weak institution environments are also characterised by high government interventions and even corruption....

What is good for big business need not generally advance a country's overall economy. Big business turnover correlates with rising income, productivity, and (in high income countries) faster capital accumulation; consistent with Schumpeter's (1912) creative destruction and recent formalizations...

We use a simple real options framework and empirical data to establish that although Japanese banks hold borrowers' shares, their interest is more aligned as a contractual claimant than a residual claimant of corporations. We then explain why the Japanese model of corporate governance was useful...

Opening up to global trade and investment is often thought to trigger institutional improvement by raising the expected benefits of institutional reform and reducing incumbents' incentives and ability to preserve the status quo. However, recent experience is not entirely consistent with this...

The small number of very large family-controlled corporate groups in many countries combined with their long continuity of control and ability to act discretely give these organizations a comparative advantage in political rent-seeking. This advantage is a key part of a self-reinforcing system...

We show that firms in industries in which firm-specific stock price variation is larger use more external financing and allocate capital with greater precision in the sense that their marginal q ratios are closer to one. Greater precision of stock prices in tracking firm fundamentals should...

Stock prices move together more in low-income economies than in high-income economies. This finding is clearly not due to market size differences, and is only partially explained by slightly higher fundamentals correlation in low-income economies. However, measures of a country?s...

This paper examines the relationship between investor protection and corporate insiders' incentive to take value-enhancing risks. In a poor investor protection environment corporations are often run by entrenched insiders who appropriate considerable corporate resources as personal benefits....