Institutions of Corporate Governance

The paper is intended to provide a broad overview of the field of corporate governance, and to integrate recent research. Corporate governance is viewed from the perspective of the agency costs involved in obtaining equity investment from minority outside stockholders in a firm controlled by others. Two mechanisms for bounding those agency costs are examined, primarily for the US, Germany and Japan: legal (fiduciary) duties imposed on those in control of the firm, and the exercise of stockholder voting rights. A tentative effort at evaluation of different governance systems concludes the paper.