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I develop two explanations for how privatization may lead states to strengthen their laws to regulate corporate governance. First, in order to maximize the revenues that they earn from privatization, governments may adopt laws that bolster corporate governance before they privatize their state-owned enterprises (SOEs). Alternatively, privatization may empower investors who favor laws that improve corporate governance. By this explanation, the more SOEs a country privatizes, the more likely it becomes to reform corporate governance. In both explanations, privatization drives corporate governance reform. In the first, it is the decision to privatize that leads states to modify these laws. In the second, however, it is the occurrence of privatization that results in legislative changes to enhance corporate governance. If the first explanation is correct corporate governance reform should precede the actual privatization of SOEs. If the second is correct, then corporate governance reforms should follow the privatization of SOEs. These hypotheses are not, however, mutually exclusive. Combining them suggests the following temporal relationship: a country adopts corporate governance reforms; it then privatizes its SOEs; and then adopts more reforms to corporate governance. I test these hypotheses on a dataset of 14 advanced industrialized European countries from 1980 to 1997. The results offer some support for the first hypothesis, but none for the second. ..PAT.-Conference Proceeding [ABSTRACT FROM AUTHOR]