This chapter explores the link between corporate governance and the rise of foreign ownership. It presents statistics that illustrate the dramatic rise in foreign ownership over the last few decades and then seeks to explain this rise and its relationship to corporate governance. In order to situate the subject under study within its larger context, this explanation starts with an exploration of the factors independent of corporate-governance considerations that favor a global market for securities and those that impede it. It will be shown that the rise in foreign ownership globally can be explained in significant part by the weakening of the impeding factors. The chapter then shows why, as a matter of theory, improvements in corporate governance can be expected to cause a rise in foreign ownership and a rise in foreign ownership can be expected to cause improvements in corporate governance, with the weakening in the non-corporate-governance factors that impede a global market for securities acting as a catalyst for the causal pathwayings going in both directions. The chapter concludes with a review of substantial empirical evidence suggesting that both causal pathways are in fact at work.
Business Organizations Law | Comparative and Foreign Law | Law
Program in the Law and Economics of Capital Markets
Merritt B. Fox,
The Rise of Foreign Ownership and Corporate Governance,
The Oxford Handbook of Corporate Law and Governance, Jeffrey N. Gordon & Wolf-Georg Ringe (Eds.), Oxford University Press
Available at: https://scholarship.law.columbia.edu/faculty_scholarship/3922