New Perspectives on the Modern Corporation series
Edited by Per-Olof Bjuggren and Dennis C. Mueller
Chapter 7: Corporate Governance and Investments in Scandinavia – Ownership Concentration and Dual-Class Equity Structure
* Johan E. Eklund INTRODUCTION 1. In essence, the corporate governance system in a country is the institutional framework that supports the suppliers of finance to corporations and enables firms to raise substantial amounts of capital (Shleifer and Vishny, 1997).1 By protecting suppliers of capital and safeguarding property, sound governance systems facilitate mobilization and allocation of capital to useful investments. Corporate governance systems are of outmost importance for the allocation of capital to its highest value use. It can be argued that the corporate governance system in a country determines the speed of structural change and economic development by affecting allocation and reallocation of capital. Therefore the crucial question is whether the corporate governance system induces managers of corporations to make good value enhancing investments decisions, or not. In particular, the ownership concentration and composition appear to matter for firm performance, as shown by Morck et al. (1988).2 This chapter looks at corporate governance and the rate of return on corporate investments in Scandinavia. The structure of ownership and its effects on performance are examined. Taking an outsider’s view of Scandinavia, the corporate governance systems in the Scandinavian countries, Sweden, Finland, Norway and Denmark, arguably display more similarities than differences. The countries share a number of important features that unify them in comparison with other countries. It has, for example, been hypothesized that the common origin of the legal systems in Scandinavia is still reflected in the quality of corporate governance (La Porta et al., 1997). Furthermore, Scandinavian firms...
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