Corporate governance, legal investor protection, and performance in Spain and the United Kingdom

Abstract

This paper studies the influence of ownership concentration, board size, and debt in firm performance of a sample of 216 companies from Spain and the United Kingdom, over a four-year period (2000-2003), with the aim of uncovering evidence on the influence of the legal environment in the design of governance mechanisms. Our findings show that the legal protection offered to investors in each country determines the use of internal governance mechanisms. The results show that ownership concentration and investor protection are substitutive mechanisms when increasing firm value, and that the latter mechanisms determine the use of the remaining governance mechanisms.