The Impact Of Government Intervention On Corporate Governance: Evidence From The EU

This paper examines the effect of government intervention on corporate governance quality in the European Union. Using the Corporate Governance Quotient (CGQ) issued by Institutional Shareholder Services (ISS) to measure corporate governance quality, I find that aggregate government intervention leads to better corporate governance. After disaggregating different types of government ownership, I find that ownership by privatized companies, sovereign wealth funds, and bailed out companies is positively related to corporate governance quality. Further, federal government ownership has a weak negative relation and ownership by royal families and pension funds has a weak positive relation with corporate governance quality.