TAILIEUCHUNG - DIRECTORATE-GENERAL FOR ECONOMIC AND FINANCIAL AFFAIRS 2004

A probit regression model is estimated in order to analyze how firm age and size affect the likelihood of being a HGF. The analysis confirms that firm age and size affect the probability of a firm becoming any type of HGF. Larger firms are more likely to be HGFs measured in absolute numbers and less likely when HGFs are measured in relative numbers. Firm age has a significant negative impact on the likelihood of being a HGF in almost all regressions, indicating that young firms are more likely to be HGFs irrespective of how HGFs are defined. Thus, new firm. | EUROPEAN ECONOMY EUROPEAN COMMISSION DIRECTORATE-GENERAL FOR ECONOMIC AND FINANCIAL AFFAIRS ECONOMIC PAPERS ISSN 1725-3187 http comm economy finance N 200 March 2004 Issues in corporate governance by Christoph Walkner Directorate-General for Economic and Financial Affairs Economic Papers are written by the Staff of the Directorate-General for Economic and Financial Affairs or by experts working in association with them. The Papers are intended to increase awareness of the technical work being done by the staff and to seek comments and suggestions for further analyses. Views expressed represent exclusively the positions of the author and do not necessarily correspond to those of the European Commission. Comments and enquiries should be addressed to the European Commission Directorate-General for Economic and Financial Affairs Publications BU1 - -1 180 B - 1049 Brussels Belgium Helpful comments were provided by Delphine Sallard on credit derivatives and audit issues Magnus Astberg on financial reporting Jean-Yves Muylle on EU initiatives Maxwell Watson especially on transition economies but also on other aspects Jan Host Schmidt on the economics of corporate governance and John Berrigan on the whole paper. ECFIN 128 04-EN ISBN 92-894-5965-4 KC-AI-04-200-EN-C European Communities 2004 Issues in Corporate Governance Abstract The objective of this economic paper is to review issues and problems arising in the area of corporate governance from a broader economic perspective at a time when a series of major corporate accounting fraud scandals has renewed interest in the subject. The paper highlights the economic significance of corporate governance for resource allocation investment decisions as well as financial market development. Effective information disclosure is then explored as the basis for effective corporate governance control procedures. Potential barriers to disclosure including complexities linked to innovative financial instruments are .

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