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date: 02 March 2021

Abstract and Keywords

This paper reviews the literature on corporate governance and firm performance in economies with relatively dispersed stock ownership and an active market for corporate control, such as the US and the UK. Section 1 outlines a framework of the basic agency problem between managers and shareholders and the corporate governance mechanisms that have evolved to address this problem. Section 2 deals with the relation between firm performance and inside ownership. Section 3 pertains to the relation between firm performance andmonitoring by large shareholders, monitoring by boards, and shareholder rights regarding takeover of the firm. Section 4 considers the relation between governance regulation and firm performance. Section 5 deals with the relation between governance and firm performance in family firms, and section 6 provides a summary and identifies some remaining puzzles and unresolved issues for future research.

Keywords: Corporate Governance, Firm Performance, Agency Problems, Inside Ownership, Large Shareholders, Blockholders, Boards of Directors, Governance Index, Shareholder Rights, Governance Regulation

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