LAW AND CORPORATE GOVERNANCE

Corporate governance concerns three sets of issues: property rights, relationships between firms and financial markets, and labor relations. Our literature review shows that the system of corporate governance that emerges within a particular country reflects the outcome of political, social, and economic struggles in that country and that it does not reflect efficiency considerations focused on managing agency relations between owners and managers. Despite these facts, much research has been done in recent years attempting to analyze whether a superior matrix of institutional arrangements or a set of best practices of corporate governance exists to produce greater economic growth. Our review shows that there does not appear to be a single set of best practices, but rather that what is important are stable institutions that are legitimate and prevent extreme rent seeking on the part of governments and capitalists.