Institutional Determinants of Good Corporate Governance: The Case of Nigeria

Abstract

Economic globalization has stimulated debate on the similarities and differences between national corporate governance systems (McCahery and Renneboog, 2002). Whilst the equilibrium of evidence appears to be tilted in favour of a convergence towards a focus on shareholder primacy, the literature remains puzzling and contradictory. In an attempt to reconcile the shareholder and stakeholder models of corporate governance, some scholars have talked about ‘enlightened shareholder value’, ‘instrumental stakeholder theory’, ‘strategic corporate social responsibility’ or ‘the good firm’ (Filatotchev et al., 2007; Jones, 1995; Kay and Silberston, 1995; Parkinson, 1995), as the hybrid model. However, in today’s world of corporate, economic and political globalization, how (and to what extent) is corporate governance shaped by firm and national level institutional environments? What are the different institutionalized expressions of corporate governance in varieties of capitalism? Which institutional parameters and arrangements constrain good corporate governance in emerging markets? Given that the spectacles of the influential agency theory do not explain these relations, our aim in this chapter is to conceptualize corporate governance structures and practices as institutionally determined and guided. We show that national corporate governance systems are endogenous responses to certain national and firm-specific institutional environments. This is critical to a better understanding of corporate governance. Specifically, we argue that corporate governance models, especially in developing countries, are inapplicable if they are not institutionally based and explained. In particular, we examine the extent to which certain underlying national conditions, such as the political, economic, legal and social environments as well as firm/industry values, culture, ethics and history, play a determining role in corporate governance.