Research Summary
Research Summary
Comparative Corporate Governance
Description
Dyck's research identifies the important role that institutions external to the firm play in determining corporate governance abuses, financial sector development, and the success of government policies such as privatization. In recent work Dyck develops an empirical measure of governance outcomes based on control premia for 39 countries that illustrates that the extraction of private benefits is a very real phenomenon that can be consistently measured. This international work not only shows that private benefits have the predicted deterrent effects on financial sector development and ownership concentration, but uses empirical grounds to identify which external institutions matter for governance outcomes. He finds that a high degree of statutory protection for minority shareholders, coupled with a high degree of law enforcement, are associated with lower control premia. But he also finds that a focus solely on legal institutions that give investors power is inadequate. Government laws that enhance competition, a high level of diffusion of the press, and a high rate of tax compliance are all factors associated with lower control premia.