Comparative Corporate Governance Research Articles

Comparative Corporate Governance

Comparative Corporate Governance

Comparative Corporate Governance from the Perspective of Japanese Listed Family Firms

Comparative Corporate Governance from the Perspective of Japanese Listed Family Firms

Further Analysis of Some Northen Asian Corporate Governance Standards After the Global Crisis

The aim of this article is to present a set of comparative corporate governance standards in some Northern Asian countries, including Bangladesh and Mongolia. There are strengths and weaknesses in these codes or practices which will be identified in this work. Therefore, this article not only identifies different points in latest corporate governance standard principles and systems in the above two countries, but also provides with a summary of evaluation of current corporate governance systems in these above countries which may enable relevant organizations in re-evaluating their current ones. Last but not least, it aims to illustrate a limited comparative set of standards of Northern Asian corporate governance, and give proper recommendations to relevant governments and institutions toward a sustainable practices in business life.

Corporate Purpose in Comparative Perspective: The Role of Governance

Corporate purpose has become a central part of doing business as usual and in the social movement to involve corporations in solving complex societal and environmental challenges. In this essay, I first deconstruct what corporate purpose means from a sociological perspective, and I submit that it is important to identify to whom that purpose is targeted. Second, I seek to make the point that corporate purpose is not universal in that there is not a one-rule-fits-all template on how to develop corporate purpose. I draw on comparative corporate governance, stakeholder management, and institutional theory arguments to illustrate how corporate purpose means different things in different societies and that the departure point of the emanation of corporate purpose varies across countries. This differential meaning is explained in part by the institutional setting as well as very different societal expectations of corporations. Finally, building on insights from existing corporate governance research, I argue that stakeholder engagement can be a useful tool toward effectively deploying corporate purpose.History: This paper has been accepted for the Strategy Science Special Issue on Corporate Purpose.

Comparative Corporate Governance in Comparative International Management (3rd Eds.)

Comparative Corporate Governance in Comparative International Management (3rd Eds.)

A Juridical Study on Lawful Position of Directors Vis-À-Vis Comparative Corporate Governance

A Juridical Study on Lawful Position of Directors Vis-À-Vis Comparative Corporate Governance

How Family and Business Group Controlling Shareholders Affect CEO Power Differently

This study examines the effects of family and business group controlling shareholders on CEO power. We draw on the literature on comparative corporate governance to maintain that families and business groups shareholders have distinctive preferences for CEO power. Specifically, family shareholders prefer to have a CEO with a clearer, stronger image as such an image is commensurate with their expectations for corporate leaders. Alternatively, business group shareholders tend to grant a CEO with less direct influence on a firm as the group emphasizes economic goals. These distinctive views prompt boards to grant varying power to their CEOs. We furthermore argue that the effects of families and business groups on CEO power would be altered by certain contingencies. Results based on a sample of public firms in Taiwan support our predictions. Implications for theories are discussed.

Board independence and firm internationalization: a meta-analysis

Purpose Despite agency theory and resource dependence theory suggesting that – albeit through different mechanisms – board independence positively influences firm internationalization, empirical evidence on this relationship has been mixed and inconclusive. Based on this, the purpose of the present study is twofold: first, to analyze and synthesize the existing empirical literature and, second, to develop new theoretical insights on the effect of board independence on firm internationalization. Design/methodology/approach The authors used advanced meta-analytic techniques that allowed them, first, to synthesize the existing empirical literature on the board independence–firm internationalization relationship and, second, to examine the effect of several contingencies on such relationship. This study relies on data from 87 primary studies (published and unpublished) carried out in multiple academic fields in the period 1998–2021 and covering 49 countries. Findings The results confirm the established agency and resource-dependence arguments, suggesting that higher board independence is associated with greater firm internationalization. Moreover, the results show that the focal relationship is moderated by home-country formal and informal institutional factors, and in particular, the legal protection of minority shareholders and family business legitimacy. The authors do not find evidence that CEO duality and board size moderate the focal relationship or that board independence has a stronger effect on breadth than on depth of internationalization. Originality/value This study lies at the intersection of the literatures on corporate governance and firm internationalization and on comparative corporate governance of the multinational firm, shedding further light on the role played by institutional environments in determining the effectiveness of corporate governance mechanisms.

The Politicization of Corporate Governance: A Viable Alternative?

Abstract It is now well-established that different markets may develop different growth-supporting institutions that can give rise to public firms and set capital markets in motion. Yet, the paradigm view still holds local alternatives as merely stepping stones, a transitional passage toward achieving a deeper and more advanced market, at which point conventional legal and market institutions—modeled on Anglo-American corporate capitalism—are still held necessary. Four decades of economic development in China challenge these conventions. With modern firms with global prominence and a capital market that is the second largest in the world, corporate governance in China seems to have passed the point of an “adjust or perish” prognostic. The system that governs Chinese firms and the ways in which capital markets function sustain strong governance attributes that go against many fundamentals in economics and legal thought. Political involvement and state ownership, both assumed to stand in the way of capital market growth, remain prevalent while the market continues to advance. Most strikingly, harmonization with conventional corporate governance been pushed aside as the Chinese Communist Party has decided to exercise an ever-more expansive and direct role in market activity. Public firms in present-day China are increasingly being governed by a “politicized corporate governance.” Political institutions with corporate governance capacities have been deployed both inside and outside firms. These institutions now buttress or even replace weaker traditional corporate governance mechanisms in the Chinese market. The implications are striking. First, despite justified reasons for alarm, a politicized corporate governance system in China can perform the main functions of corporate governance elsewhere, thereby offering some benefits for public firms and their stockholders. Second, these developments show how path-dependent corporate governance attributes, here political institutions, reject convergence predictions yet have enough plasticity to evolve and to support modern firms and markets beyond assumed thresholds and developmental milestones. In so doing, China’s politicized corporate governance casts doubts on law and development conventions as well as on both sides of a long-standing governance convergence debate. Finally, the politicization of corporate governance in China offers a new direction in comparative corporate governance scholarship, providing evidence of an instituted reversal from outwardly convergent corporate governance toward a new form of a planned economy.

Corporate governance of state-owned enterprises in Iran: an exploratory pathology

PurposeDespite the rather adequate physical and human resources available to Iranian state-owned enterprises (SOEs), they have proved not only unproductive and unprofitable but also corrupt in cases due to their corporate governance (CG) systems. This study aims to identify the most important challenges faced within designing, implementing and operating such systems in Iranian SOEs.Design/methodology/approachA judgmental sampling technique was adopted for the purposes of the present qualitative study to select a heterogeneous group of interviewees in terms of experience and expert knowledge in CG and SOEs. Using 28 semi-structured interviews and the thematic analysis methodology within an exploratory approach, the themes/challenges were extracted from the data thus collected that were subsequently analyzed and explicated.FindingsThe 16 challenges derived from the data set were subsequently classified into the four categories of “general assembly deficiencies”, “contextual issues of ownership”, “board deficiencies” and “external managerial constraints”.Research limitations/implicationsThis study aims to provide insights into policy-making systems at both national and international levels to gain a better understanding of the contextual factors that could be exploited toward developing and/or reforming CG codes. To improve SOEs, this study also suggests four main solutions to the CG challenges faced within Iran and similar centralized economic planning systems.Originality/valueThe literature on the topic indicates that while a few theoretical and empirical studies have been conducted on CG of SOEs, no study has ever been conducted on similar Iranian cases. The present study provides ample empirical evidence from the CG systems in a state-controlled and centralized economic system to offer new insights into the comparative CG, especially in a developing country like Iran, where the government is the major player in the economy.

Comparative Corporate Governance

The question how the governance of enterprises, including the governance of capital markets, should be arranged is as old as the market economy and capitalism itself. Reforms have been stimulated by recently corporate scandals that imposed a critical discussion on the way public corporations are directed and controlled. The literature on corporate governance (CG) originated in the US and the UK, and was initially concerned with a fairly narrow set of issues such as how shareholders can monitor and motivate management to act in their interests. This literature distinguishes between two dichotomous CG models. First, the shareholder-oriented model, which is characterized by strong shareholder rights, single powerful CEO and protection of minority shareholders, prevails mainly in Anglo-Saxon countries. Second, the stakeholder-oriented model, which is characterized by weaker shareholder rights, consensus leadership, and concentrated ownership, prevails in most of the European continent and Japan. For a number of reasons, comparative CG and convergence debates often take place within the contours of the cultural–institutional or societal approach used in this book. Since institutionalists and the societal approach stresses the embeddedness of national institutions and ‘complementarities’ between institutions, alternative responses to internationalizing capital markets, other than convergence, appear possible. Companies may respond very differently to similar sorts of pressure, and distinct sets of ‘best practice’ contingent on the national context may emerge. The current chapter applies this approach by examining the interaction between CG aspects in large, small and medium-sized firms and national institutions in different countries, in the context of internationalizing capital markets. By adopting an institutional approach, the first section describes the major CG features influencing post-war company decision-making in advanced economies. The in-depth explanation of the two main models is followed by an analysis of the Japanese CG model, which is argued to be similar to the Rhineland model. The second section explores the continental European models, which are variants of the two main models. The analysis shows that variations among the advanced and transition economies in these CG features stem from differences in key societal institutions, such as governmental regulation, the character of the financial system, corporate law, and cultural values. In the third section, we offer a brief overview of the models of CG in BRIC countries and more specifically, we discuss in the form of case studies, CG in Russia and China. The fourth section deals with the worldwide diffusion of CG codes, which are instruments of self-regulation, defining best practices with respect to boards, management, supervision, disclosure and auditing. We discuss the main drivers of their diffusion and characteristics across countries, as well as the possible convergence of CG best practices. Finally, the closing case, dealing with the Ahold scandal, should be seen in the light of the link between CG and CSR. The chapter concludes with the major strengths and weaknesses, as well as future directions of change in both CG models.

Enhancing Vietnam Bank Management and Governance via References of Several Northern Asian Corporate Governance Standards after the Global Crisis - Cases in Singapore and Pakistan

During the past years, there are many corporate scandals in financial and non-financial sectors all over the world, esp. In Vietnam financial and banking market as well, which represents a weak corporate governance structure. The application of quality management in corporate governance has not been tested, checked and show its effectiveness. The aim of this paper is to present a set of comparative corporate governance standards in some Northern Asian countries including: Singapore and Pakistan. With the use of qualitative combined with comparative analysis method, there are strengths and weaknesses in these codes or practices which will be identified in this paperwork. And we can use the results as reference to strengthen Vietnam bank management and governance. Therefore, this paper not only identifies different points in latest corporate governance standard principles and systems in the above two (2) countries, but also provides with a summary of evaluation of current corporate governance systems in these above countries which may enable relevant organizations in re-evaluating their current ones. In addition, this study identified main quality and sub-quality factors of corporate governance system toward a better leadership combined with sustainability for firms. Last but not least, it aims to illustrate a limited comparative set of standards of Northern Asian corporate governance, and give proper recommendations to relevant governments and institutions toward a sustainable practices in business life.

Comparative Law and Economics: Aspirations and Hard Realities

Abstract The fields of comparative law and law and economics have not had a happy or productive relationship. There are recent notable exceptions, such as comparative corporate governance, comparative constitutional law, and comparative competition law, but we are surprised by that limited cross-fertilization, given that so many other areas of law have found concepts from law and economics helpful and, in some instances, transformative. To try to understand this phenomenon, we first examine a twenty-five-year attempt by an international group of legal and economic scholars to foster interaction between the two fields. We then examine the recent history of the field of comparative economics and its successor field, transition economics, with mainstream economics to see if there are lessons from that literature that help to explain the relative paucity of a comparative law and economics literature. We next look at one notable recent attempt to use law and economics to examine a comparative law topic—the legal origins hypothesis. We also speculate on the extent to which the status of comparative law within American law schools and the overselling of the revolutionary aspects of law and economics might help to explain the frigid relations between comparative law and law and economics. Finally, we seek to propose a way forward in which each field can learn from the other, while also recognizing that we may be expecting too much too soon. The “silent artillery of time” may be the great spur to this particular scholarly cross-fertilization.

The Role of Country Governance in Firm Responses to Economic Protectionism

Many countries have recently enacted investment-related national security screening laws and regulations (“national security screening laws” for short) that protect domestic firms from foreign ownership. Agency theory prescribes that these laws will dissuade managers from risky, long-term research and development (R&D) investments because these laws can dilute the disciplining role of the market for corporate control. Yet, agency theory’s prescription undermines the importance of country governance that firms are also subject to. We propose that firms subject to different country governance exhibit differential responses to the enactment of national security laws because country governance can shape the type of governance issues faced by firms. In addition, the role of country governance in shaping firms’ differential responses is stronger when managers have a lower level of decision discretion prior to the enactment of these laws. Using 40,843 firms from 61 countries, we find support for our arguments. Findings from this study advance comparative corporate governance research by highlighting that the influence of foreign acquisitions on R&D investment is contingent on country governance that firms are embedded in.

Mainstream theories of corporate governance and the corporate governance – firm performance relationship

This paper reviews the mainstream theories of corporate governance and the relationship between corporate governance structures and firm financial performance. We show that the four predominant theories often employed to study the corporate governance – firm performance relationship are agency theory, stewardship theory, resource dependence theory, and institutional theory. In spite of being an overwhelmingly predominant theoretical approach in corporate governance studies, agency theory has recently been criticized for not fully reflect corporate governance practices in various institutional contexts. It is, therefore, necessary to re-examine the traditional agency framework to understand the corporate governance – firm performance relationship in various institutional environments. There are also calls for the application of a multi-theoretical approach to capture the complex nature of the corporate governance – firm performance relationship. It is also clear from our review that the effect of corporate governance on firm performance is inconclusive as empirical findings concerning this relationship are mixed in different analysis contexts. It is argued that such inconclusive findings of the corporate governance – firm performance relationship may be caused by the national institution differences and the imperfection of estimation techniques. Several recent studies in corporate governance support the view that the implementation of corporate governance mechanisms in a country is influenced by its institutional environment. For this reason, the effectiveness of corporate governance mechanisms also varies from country to country, or in other words, it is country-specific. This suggests that future research focusing on cross-national comparative contexts may provide more insight or in-depth information on the corporate governance – firm performance relationship. We also suggest that the potential mediating impacts of institutional characteristics on the corporate governance – firm performance relationship should be taken into consideration when conducting cross-country comparative corporate governance studies.

The Role of Institutional Investors in Improving Board of Director Attributes around the World

This paper investigates the role of institutional investors in the improvement of corporate governance for the companies in which they invest (investee companies) using evidence about the attributes of boards of directors across 15 countries. Furthermore, this paper examines the extent to which the activism of institutional investors is determined by the institutional environment, to include various economic conditions (pre-crisis, crisis and post-crisis), legal systems and ownership structures. Drawing from the agency theory and institutional theory, the results show that foreign institutional investors are the main promoters of board governance structures across the globe. This study also provides evidence that institutional investors promote the independence of a board and its audit and compensation sub-committees (but excluding its nomination committee). The study also demonstrates that institutional investors reduce board entrenchment, though it presents no evidence that institutional investors reduce board busyness. The results also suggest that institutional investors behave differently when operating within different economic conditions (pre-crisis, crisis and post-crisis), legal systems and ownership structures. This paper contributes to the growing literature on shareholder activism and comparative corporate governance mechanisms. The findings suggest that the activism of institutional investors is contingent on the institutional settings, to include economic conditions, legal systems and ownership structures.

COVID-19 and Comparative Corporate Governance

With the pandemic caused by the novel coronavirus SARS-CoV-2 raging around the world, many countries’ economies are at a crucial juncture. The COVID-19 external shock to the economy has the potential to affect corporate governance profoundly. This article explores its possible impact on comparative corporate governance. For an economy to operate successfully, a society must first find a politically sustainable social equilibrium. In many countries, historical crises – such as the Great Depression and World War II – have resulted in a reconfiguration of corporate governance institutions that set the course for generations. While it is not yet clear whether COVID-19 will have a similar effect, it is possible that it will change patterns of what kind of firms are – from an evolutionary perspective – likely to survive, and which ones are not. We argue that to some extent, it will accelerate ongoing trends, whereas in other areas it put corporations on an entirely new course. We observe three trends, namely the need for resilience, a growth of nationalist policies in corporate law, and an increasing orientation toward ‘stakeholder’ interests. First, firms will have to become resilient to the crisis, and consequently long-term oriented. Corporations that are not operating merely on an arm’s length capital market basis but are integrated into a network, generated by core shareholders, state ownership or bank lending may be more likely to survive. In addition, firms are beginning to interact with their workforce differently in their attempts to maintain what could be called ‘healthy human capital.’ Second, we are likely to see a resurgence of nationalism in corporate governance to ensure that foreign ownership and interconnected supply chains do not put national security at risk. Third, the existing critiques of inequality but also climate change awareness will accelerate the trend toward a broadening of corporate purpose toward ‘stakeholderism’ and public policy issues. As in the past years, institutional investors acting as ‘universal owners’ will play a role in shaping this trend.

Is corporate governance a good predictor of SMEs financial performance? Evidence from developing countries (the case of Lebanon)

ABSTRACT This paper aims to empirically examine the link between corporate governance and the financial performance of small and medium enterprises (SMEs) in Lebanon. To this end, we use a questionnaire and collect data from a sample of 150 non-listed companies. The Bundles approach following R. Aguilera et al. (2008). ‘An Organizational Approach to Comparative Corporate Governance: Costs, Contingencies, and Complementarities.’ Organization Science 19: 475–492.) is used to construct a corporate governance score based on three main components. By applying 2SLS regression to control for endogeneity and a quantile regression, we study the impact of corporate governance (CG) score and each of its components on the financial performance (FP) measured by return on assets (ROA) and return on investment (ROI) while controlling for SMEs age, size, and industry. The study indicates positive interdependency between CG and FP. Effective CG results in increased FP and better performing companies tend to improve their CG). Interestingly, our results show that this relationship depends on the level of SMEs FP These findings provide managers with useful insights and serve as an underpinning for more regulatory efforts aimed at strengthening the CG of SMEs in Lebanon.

The Rise of International Corporate Law

Comparative corporate governance has focused either on prevailing differences across legal systems, or on spontaneous legal transplants of foreign institutions in response to global competition. This essay argues that corporate law today is not only a product of the invisible hand of the market, but also of the soft (and not-so-soft) hands of international organizations and standard setters. By tracing the emergence of international corporate law (ICL) since the Asian crisis of the late 1990s, it shows how the IMF, the OECD, the World Bank, and the United Nations, among several other international players, have helped shape legal reforms and corporate governance developments around the world. The observed influence of ICL ranges from the impulse for independent directors and the control of related-party transactions, to the growth of ESG investment factors and human rights policies. The rise of ICL responds to interjurisdictional externalities and nationalist bias of domestic regimes that have been largely neglected by prevailing theories, which failed to predict and notice the strong push for international coordination and standard setting in the field. ICL has also gone beyond merely prescribing an Anglo-Saxon model of corporate governance to also promote legal innovations that place the United States in the receiving end of international pressure. Legal implants from ICL, rather than legal transplants from a foreign jurisdiction, are an increasingly relevant force behind corporate governance change. While ICL has been influential, its efficacy and normative vision face challenges. The time has come to move beyond an exclusively comparative focus to also scrutinize the potential and limits of corporate lawmaking at the international level.

Research Handbook on Comparative Corporate Governance: Introduction

This chapter introduces the Research Handbook on Comparative Corporate Governance and surveys several of the central themes addressed in the book. Most corporate governance research deals with the interaction between board members, officers, and shareholders, primarily in large, publicly traded corporations. Considerable volumes of literature thus are preoccupied with reducing conflicts of interest between shareholders and management, and consequently minimizing agency cost, thus vindicating the narrow finance perspective. Given the predominance of controlling shareholders around the globe, the literature increasingly focuses acutely on conflicts between controlling and minority shareholders. In a comparative or international context, research also often addresses all groups whose interests are affected by corporate activities and who have some degree of influence on corporations, such as creditors and employees. The book attempts to take a broad perspective. It deals with interactions between boards and shareholders, as well as minority and controlling shareholders. We cover legal duties and their enforcement, as well as the balance of powers generated by the institutional setup. Nevertheless, the interests of other “stakeholders” are very much present. The authors also explore corporate purpose, including short-termism, corporate social responsibility (CSR) and environmental, social and governance (ESG) issues. In addition, the book tackles key debates in the field, including the significance of legal origins for the development of corporate law, convergence in corporate governance, and the appropriate choice of research methods in comparative corporate governance scholarship.