Data on corporate governance and disclosure practices reveal wide within-country variation that decreases with the strength of investors' legal protection. A simple model identifies three firm attributes related to that variation: investment opportunities, external financing, and ownership structure. Using firm-level governance and transparency data from 27 countries, we find that all three firm attributes are related to the quality of governance and disclosure practices, and firms with higher governance and transparency rankings are valued higher in stock markets. All relations are stronger in less investor-friendly countries, demonstrating that firms adapt to poor legal environments to establish efficient governance practices.
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