TY - JOUR AU - Aggarwal,Reena AU - Erel,Isil AU - Stulz,Rene M. AU - Williamson,Rohan TI - Do U.S. Firms Have the Best Corporate Governance? A Cross-Country Examination of the Relation between Corporate Governance and Shareholder Wealth JF - National Bureau of Economic Research Working Paper Series VL - No. 12819 PY - 2007 Y2 - January 2007 UR - http://www.nber.org/papers/w12819 L1 - http://www.nber.org/papers/w12819.pdf N1 - Author contact info: Reena Aggarwal Georgetown University Finance Group McDonough School of Business 529 Hariri Washington, DC 20057 Tel: 202-687-3784 E-Mail: aggarwal@georgetown.edu Isil Erel Department of Finance Ohio State University 832 Fisher Hall 2100 Neil Avenue Columbus, OH 43210 Tel: 614-292-5174 E-Mail: erel@fisher.osu.edu Rene M. Stulz The Ohio State University Fisher College of Business 806A Fisher Hall Columbus, OH 43210-1144 Tel: 614/292-1970 Fax: 614/292-2359 E-Mail: stulz_1@cob.osu.edu Rohan Williamson Georgetown University Finance Group McDonough School of Business 587 Hariri Building Washington, DC 20057 Tel: 202 687 2284 Fax: 202 687 4031 E-Mail: WILLIARG@georgetown.edu AB - We compare the governance of foreign firms to the governance of similar U.S. firms. Using an index of firm governance attributes, we find that, on average, foreign firms have worse governance than matching U.S. firms. Roughly 8% of foreign firms have better governance than comparable U.S. firms. The majority of these firms are either in the U.K. or in Canada. When we define a firm's governance gap as the difference between the quality of its governance and the governance of a comparable U.S. firm, we find that the value of foreign firms increases with the governance gap. This result suggests that firms are rewarded by the markets for having better governance than their U.S. peers. It is therefore not the case that foreign firms are better off simply mimicking the governance of comparable U.S. firms. Among the individual governance attributes considered, we find that firms with board and audit committee independence are valued more. In contrast, other attributes, such as the separation of the chairman of the board and of the CEO functions, do not appear to be associated with higher shareholder wealth. ER -