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Cover of: Corporate Governance and the Determinants of Investment
Klaus Gugler, Dennis C. Mueller, B. Burcin Yurtoglu

Corporate Governance and the Determinants of Investment

Section: Articles
Volume 163 (2007) / Issue 4, pp. 598-626 (29)
Published 09.07.2018
DOI 10.1628/093245607783242945
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  • 10.1628/093245607783242945
Summary
We use investment-cash flow regressions to show that both asymmetric-information and agency problems are more severe in Continental Europe than in the Anglo-Saxon countries leading to too little investment by firms with attractive investment opportunities and too much by those with poor investment opportunities. Legal systems, accounting standards, and ownership structure systematically affect the investment-cash flow sensitivity. Cash flow coefficients are largest for family-controlled firms in Europe.