Ammann, ManuelManuelAmmannOesch, DavidDavidOeschSchmid, MarkusMarkusSchmid2023-04-132023-04-132013https://www.alexandria.unisg.ch/handle/20.500.14171/8985410.1111/j.1468-036X.2009.00505.xThis paper investigates whether the valuation effect of corporate governance depends on the degree of competition in the companies' product markets in a large international sample covering 14 countries from the European Union (EU). Besides providing external validity of previous U.S.-centered studies, this paper uses more comprehensive and reliable measures of both product market competition and corporate governance. Consistent with the hypothesis that product market competition acts as a substitute for corporate governance as competitive pressure imposes discipline on managers to maximize firm value, our results show that corporate governance significantly increases firm value in non-competitive industries only. When investigating the channels through which firm value may be increased, we find that good governance for firms in non-competitive industries leads them to have more capital expenditures, spend less on acquisitions and be less likely to diversify. Our results are robust to a large number of robustness checks including the use of alternative measures of competition and governance, as well as using alternative regression specifications. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1771622enProduct Market CompetitionCorporate GovernanceFirm Valuationjournal article