Firms' responses to corporate governance reform in an emerging economy from the perspective of institutional logics

Abstract

Drawing insights from the institutional logics perspective, this study investigates the roles of interest groups in determining firms’ adoption of a proactive response that goes beyond mandatory compliance with government regulations and the resulting consequences on firm performance. Empirical results from corporate governance reform in Taiwan show that influenced by family logics, family involvement from controlling families has a negative impact on a firm’s proactive response to board regulations, but shareholder-oriented logics conveyed by foreign investors have a positive impact on a firm’s proactive response to board regulations. Furthermore, the results illustrate that firms’ proactive response can improve a firm’s performance. This study is developed from the lens of the institutional logics in a domain of principal–principal conflicts and demonstrates the effects of different interest groups on firms’ strategic choices to institutional pressures. It also extends the existing understanding of firms’ behaviors and the outcome of institutional transitions.