Corporate Governance Regulations Research Articles

Business Group Affiliation and Board Independence in India: The Effects of Structural and Situated Attention

ABSTRACTResearch Question/IssueThis study examines how business group affiliation shapes firm attention and consequently influences firms' compliance with board independence requirements.Research Findings/InsightsUsing a longitudinal sample of Indian listed firms, we find that group‐affiliated firms are more likely to comply with board independence requirements than nongroup firms, especially when the affiliated firm is larger or when a greater proportion of firms in the business group has adopted an independent board structure. However, the likelihood of compliance in group‐affiliated firms is subject less to the influence of the industry compliance norm. We also document that group‐affiliated firms are less sensitive to the influence of the industry task environment than stand‐alone firms. Other things being equal, the influences of industry complexity, munificence, and dynamism on compliance are smaller in group affiliates.Theoretical/Academic ImplicationsOur study contributes to the attention‐based view by extending the structural attention argument from organizational structures within firm boundaries to organizational forms across firm boundaries. We argue that the network structure of business groups shapes affiliated firms' attention focus and consequently affects their compliance patterns. We also highlight the joint effects of structural and situated attention on shaping organizational decisions. We reveal that the interplays of business groups' organizational form and industry contexts give rise to distinct compliance patterns between affiliated and unaffiliated firms and among different types of group‐affiliated firms. As such, we supplement prior corporate governance literature by stressing the influences of inter‐organization networks and industry task environment on board structure.Practitioner/Policy ImplicationsOur study indicates that inter‐organizational networks affect compliance with corporate governance regulations. Thus, the government could utilize inter‐organizational relationships and peer influence to encourage compliance. Our study also highlights the impact of industry environments and business group structure on board composition and managers' cognitive limitations that prevent them from attending to all situational cues. Thus, it is essential for managers to allocate their scarce attention to scanning various domains of their firms' external environments and internal circumstances when making strategic and corporate governance decisions.

Corporate Governance, Industry Regulation and Efficiency of Retirement Benefit Schemes in Kenya

The significance of retirement benefits arrangements has emerged in the wake of the waning traditional methods of caring for the elderly and the expected surge in the aging population, especially in developing economies. Despite the key role that retirement benefit arrangements play, there has been limited research on how corporate governance and industry regulation influence their efficiency. This study sets out to investigate the relationships among corporate governance, industry regulation and efficiency of retirement benefit schemes in Kenya. The study is grounded in several theoretical frameworks, including agency theory, stewardship theory, and financial distress theory. The study employs a quantitative research design, utilizing panel regression analysis to test the hypotheses. Data was collected from 896 observations across 128 retirement benefit schemes in Kenya, covering a seven-year period from 2015 to 2021. The results reveal that employee representatives on the board significantly and positively influence the efficiency of these schemes. Conversely, independent board members are found to have a negative effect on efficiency, suggesting potential challenges such as conflicts or slower decision-making processes. The study concludes that while corporate governance and industry regulation play significant roles in influencing the efficiency of retirement benefit schemes, their effects are interdependent and context specific. This study contributes to agency theory by providing empirical evidence that highlights the complexities of board composition in aligning the interests of managers and stakeholders within retirement benefit value-chain. The study reflects the importance of stakeholder-inclusive governance, particularly employee representation, as a means of aligning interests and enhancing organizational efficiency.

Historical and legal aspects of corporate governance in LLCs according to the legislation of Poland and Ukraine

The article provides a detailed examination of the evolution of corporate governance in Ukraine and Poland, focusing on the development of legislation in both countries. The author analyzes the historical development of corporate structures, tracing their evolution from antiquity and the Middle Ages to the present day, highlighting key stages and changes in legal norms regulating corporate governance in Poland and Ukraine. The article begins with a review of early forms of corporate structures in ancient civilizations and tracks their development through significant historical periods in Europe. The stages of corporate governance development in Poland and Ukraine during the 19th and 20th centuries are separately examined. In Ukraine, the formation of corporate governance was constrained by the legal norms of the Russian Empire, and only with the transition to a market economy in the 1990s a significant development of corporate forms was noticed, particularly it concerned limited liability companies (LLCs). In contrast, Poland’s development of corporate law was marked by intense changes, especially after the fall of the communist regime and accession to the European Union, which facilitated the eligibility of Polish corporate law according to European standards. The author provides a detailed analysis of the key stages of legal changes in both countries, including the codification of corporate law, adaptation to European norms, and the challenges encountered at each stage. The article also explores the impact of economic and political changes on the development of corporate governance in both countries, emphasizing that although the initial stages of corporate governance development in Ukraine and Poland were somehow similar due to geographical and historical closeness, their further development differed significantly. Poland went through stages of intensive reforming and EU integration, which substantially influenced the modernization of its corporate law. Meanwhile, significant changes in corporate governance in Ukraine began only in the 1990s and continue to modern days, facing certain challenges and obstacles on the way to full integration into European legal standards. The article reveals both common and different features of the evolution of corporate law in these countries. The findings provide a deeper understanding of the impact of historical and political factors on the formation of modern corporate practices and norms in both countries. The author concludes that despite the fact that both countries started moving into corporate governance from similar foundations, their subsequent development was significantly different because of the influence of both internal and external reasons. Poland has managed to successfully adapt its legislation according to European standards, while Ukraine is still in the process of transformation. This highlights the necessity for continued reforms in Ukraine, particularly for integration into the European legal space, which is critical for ensuring the stability and transparency of corporate governance in the country.

FISCAL ASPECTS OF ESG BUSINESS DEVELOPMENT CONCEPTS

The subject of the study is the fiscal aspects of the ESG concept of business development. Methodology. The study uses general scientific methods, in particular, theoretical generalisation, methods of analysis and synthesis and statistical analysis, as well as the graphical method to visualise the results of the study. The purpose of the study is to analyse the strategic guidelines of tax policy through the prism of the ESG concept. Conclusion. The fiscal aspects of the ESG concept are an important element in understanding its impact on business. They include various tax incentives and mechanisms that promote the implementation of ESG standards and take into account the consequences of non-compliance for businesses. In particular, fiscal policy includes tax incentives for businesses that invest in green development, support social initiatives or improve corporate governance. In a broad sense, instruments such as environmental taxes are aimed at achieving sustainable growth and economic development. Strategic tax policy guidelines under the ESG approach include encouraging investment in sustainable technologies through tax incentives for companies investing in renewable energy and environmentally friendly projects. Social initiatives are supported through tax rebates for companies that develop programmes to develop local communities and improve working conditions. Corporate governance regulations require companies to report on the environmental, social and governance aspects of their activities. Promoting the circular economy includes tax incentives for companies that implement recycling and waste reduction practices. Support for small and medium-sized businesses includes tax incentives for SMEs that implement ESG standards and easier access to green finance. International cooperation involves bringing tax policy in line with international ESG standards and participating in global tax transparency initiatives. Adaptation to climate change includes the introduction of taxes on greenhouse gas emissions and the transition to low-carbon business models. Green project financing involves the use of tax revenues to support green initiatives. Innovations in tax administration are being introduced through new technologies, and education and training include funding for ESG training programmes. These guidelines will help businesses adapt to new conditions, create sustainable value and meet modern environmental, social and governance requirements.

Tax avoidance, CSR performance and CEO characteristics: Evidence from developed and developing countries

We explore the association between tax avoidance, CEO characteristics, and corporate social responsibility based on environmental, social, and corporate governance (ESG) ratings, with a specific focus on financial firms in both developed and developing countries. Despite extensive literature on CSR and tax behavior, there is a gap in understanding how these elements interact within the financial sector across diverse economic environments. Using a dataset comprising 996 financial firms from 51 countries, spanning the period from 2002 to 2021, we find a significant negative association between ESG performance and tax avoidance for firms in developed countries, suggesting that firms in developed countries with higher ESG engagement tend to pay more taxes. The results in developed countries also indicate that governance and the social pillar are the factors contributing to the reduction of tax aggressiveness. On the contrary, our results reveal a significant positive relationship between CEO duality and tax avoidance for firms in developing countries. These results not only fill the existing research gap by providing empirical evidence in the links between ESG, CEO characteristics, and tax avoidance in the financial sector but also underscore the importance of institutional differences between developed and developing countries. Our results remain robust when using alternative estimators that control for heteroskedasticity and endogeneity. Our findings have important implications for policymakers and market participants, highlighting the need of a strong corporate governance and tax regulation that consider both ESG performance and CEO attributes.

Prudential Regulations And Performance Of Finance Of Tier 2 Banks In Kenya

The research delves into the intricate relationship between prudential regulations and the performance of finance of Tier 2 banks in Kenya. Through a comprehensive analysis, the study aims to shed light on how adherence to prudential standards impacts the operational and financial outcomes of these banks. By examining key variables such as credit, liquidity, corporate governance, and capital regulations, the research seeks to uncover the underlying mechanisms that drive performance of finance within the banking sector. Drawing on a comparative design and employing a linear regression model, the study reveals significant insights into the effects of prudential rules on the performance of finance of Savings and Credit Cooperative Organizations (SACCOs) in Kenya. Prior to the implementation of prudential legislation, factors such as liquidity, membership growth, core capital, and credit management did not significantly predict performance of finance. However, post-implementation, these variables emerged as crucial determinants of financial success, emphasizing the importance of regulatory compliance for sustainable business growth. The findings underscore the necessity for SACCOs and Tier 2 banks to adhere to prudential standards to enhance their performance of finance and capitalize on increased business opportunities. By bridging the gap in existing literature and providing a nuanced understanding of the impact of prudential regulations, this research contributes valuable insights to the ongoing discourse on banking regulations and financial stability in Kenya

Analysis and Classification of Corporate Fraud Based on the Literature and Investigated Cases in Romania

Abstract Corporate fraud has become increasingly common and sophisticated in today’s complex economic world, and a variety of strategies for perpetrating fraud have arisen. Financial fraud has various negative implications in the corporate sector since it reduces efficiency and undermines confidence and loyalty among all stakeholders. In this context, the aim of this article is to identify the various types of corporate fraud by describing and categorizing them based on the motivation and purpose for which they are committed; additionally, different types of corporate financial crimes were examined in a case study for Romania. Data for this study were gathered from past research on the subject as well as other national databases on financial crime. Tax evasion, financial statement manipulation, and bankruptcy fraud to deceive financial data users are among the various types of fraud examined. Financial fraud in organizations is a continually changing topic. The findings suggest that corporate fraud must be prevented at multiple levels, including corporate governance, internal control and external regulation. This study contributes to the existing body of knowledge on corporate fraud and can be utilized as a resource by managers and regulators looking to better understand fraud and strengthen governance and internal control systems.

ANALYSIS OF THE NEW LAW ON CORPORATE GOVERNANCE IN STATE-OWNED ENTERPRISES IN SERBIA IN THE LIGHT OF OECD GUIDELINES

In this paper the authors analyse some questions pertaining to the reform of state-owned enterprises in Serbia regarding the compatibility of the new legal regulation of corporate governance in the public sector with the OECD Guidelines. The analysis focuses on the principles and recommendations for more efficient implementation of reforms in state-owned business entities as outlined in the OECD Guidelines, as well as on the provisions of the new Law on the Management of Companies Owned by the Republic of Serbia. The analysis aims to determine whether the new solutions have helped in achieving a uniform legal framework and to what extent these new solutions contribute to the realization of the state’s ownership interests, value creation in the public sector, and the public good.

Analisis Pengungkapan Tata Kelola Syariah pada Perbankan Syariah Indonesia, Malaysia dan Bahrain

Objectives: This study aims to test and analyze the effect of sharia supervisory board size, sharia supervisory board expertise, sharia supervisory board meetings, audit committee size, audit committee expertise, audit committee meetings, and CEO duality on shari'ah corporate governance in 15 Islamic banks in Indonesia, Malaysia and Bahrain during the period 2013-2022.Design/method/approach: The analysis technique in this study is quantitative with multiple regression analysis tools with a panel data approach Results/findings: The results of this study are (1) supervisory board expertise and meetings have a significant effect on shari'ah corporate governance disclosure (2) supervisory board size, audit committee size, meetings. expertise and CEO duality have an insignificant effect on shari'ah corporate governance disclosureTheoretical contribution: The application of Stewardship Theory to the disclosure of Shari'ah Corporate Governance as well as expanding insight and literature on Shari'ah Corporate Governance, Shari'ah Corporate Governance regulations, and the application of standards used by Islamic banking in several countries.Practical contribution: As a reference for regulators related to Shari'ah Corporate Governance to improve the quality of the standards that have been set.Limitations: The research object is only carried out in three countries, namely Indonesia, Malaysia and Bahrain so that the sample studied is still small

INVESTIGATING THE IMPACT OF AUDIT COMMITTEE ATTRIBUTES ON COMPANY PERFORMANCE: A MALAYSIAN FOCUS

Background and Purpose: This study aims to examine the relationship between selected audit committee attributes (gender diversity, size, meeting, independence, expertise) and company performance that are assessed as return on equity (ROE) and return on asset (ROA). As one of the primary corporate governance mechanisms facilitating corporate efficiency, audit committees positively impact company performance. Methodology: This quantitative cross-sectional study underpinned the agency theory through the target population: public listed companies under the Bursa Malaysia. Secondary data were gathered from the corporate annual report of 106 companies and Eikon database between 2018 and 2020 and subsequently analyzed with Pearson Correlation and Multiple Linear Regression using SPSS. Findings: Resultantly, a positive gender diversity-size correlation was identified with company performance as opposed to meeting, independence, and expertise. Furthermore, a significant gender diversity-size relationship was determined with company performance while no substantial counterparts between (i) meeting and independence and (ii) expertise and company performance were identified for the selected public listed companies. In this vein, audit committee attributes (gender diversity and size) could be utilized as a mechanism for high company performance. Contributions: The study outcomes offer useful insights into optimizing current corporate governance structures and regulations for relevant authorities. Keywords: Audit committee, corporate governance, company performance, Malaysia. Cite as: Gregory, V., Yusoff, H., Tapsir, R., & Fauzi, H. (2024). Investigating the impact of audit committee attributes on company performance: a Malaysian focus. Journal of Nusantara Studies, 9(2), 185-217. http://dx.doi.org/10.24200/jonus.vol9iss2pp185-217

The nexus between board audit committee attributes and financial performance of firms in Africa

This research aims to study the connection between the features of board audit committee of a firm and its financial performance in Africa, by looking at the board audit committees’ characteristics of publicly traded companies in the four (4) biggest African financial markets. This research conducted an empirical analysis of the committee features in the years following the global financial crisis and before the COVID-19 pandemic outbreak. The data covered the period between 2013 and 2019. We analyzed the data using correlation analysis, GLS (Fixed and Random Effect Models), and GMM. We used features of the committee as explanatory variables. These include an independent outside director as the chairperson of the committee, whether the committee guards the integrity of the financial reporting of a firm, whether the committee regularly meets and hears the recommendations and complaints of the firm’s external auditor, and whether the committee effectively monitors the management of the firm. Furthermore, for the dependent variable; ROE and ROA were utilized as the metrics of the financial performance of a firm. The results exhibit positive and significant relations between the board audit committee features such as; effective monitoring of management, guarding the integrity of financial reporting, an independent director as chairperson of the committee, regularly meeting and hearing the recommendations and complaints of the external auditor, and the firm’s financial performance measures. The findings are useful to corporate governance regulators who are seeking to improve corporate governance guidelines and minimize the corporate insolvency of firms in Africa.

Whose firm? Resilience of the German corporate sector to financialization

Abstract We examine how financialization has progressed in the German nonfinancial corporate sector since the 2000s. Using a sample of firms historically listed in the largest German stock market indices, DAX and MDAX, we not only confirm the rise of international passive asset managers but also find a growing prevalence of controlling business families. Although executive pay increasingly consists of equity grants, indicating growing shareholder value orientation, we do not identify corporate financialization in terms of rising share buybacks and payout rates. Instead, ever larger shares of corporate funds are kept inside firms as retained earnings. While firms in the USA ‘downsize-and-distribute’ under the pressure of institutional investors, we hold that German firms ‘save-and-sit-on-it’. Although shaped by the liberalization of corporate governance regulations, this regime still relies on blockholdings and codetermination, while integrating asset managers as new providers of patient capital.

Corporate Governance and Firm Performance: A Cross-Country Analysis in South Korea

Purpose: The aim of the study was to examine the corporate governance and firm performance: a cross-country analysis. Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries. Findings: Financial regulations in Germany impact market liquidity through a complex interplay of factors. While they enhance stability and investor protection, compliance costs and altered trading dynamics may initially hinder liquidity. However, regulatory initiatives driving innovation and global harmonization can ultimately foster a more efficient market environment, benefiting both domestic and international Unique Contribution to Theory, Practice and Policy: Agency theory, stewardship theory & institutional theory may be used to anchor future studies on the corporate governance and firm performance: a cross-country analysis. The study should provide practical recommendations for firms and corporate boards to enhance their corporate governance practices based on empirical findings. The study should inform policymakers and regulatory authorities about the implications of corporate governance regulations on firm performance and market competitiveness.

Impact of Foreign Direct Investment (FDI) on Economic Growth: A Study of Brazil

Purpose: The aim of the study was to investigate the impact of foreign direct investment (FDI) on economic growth: a study of Brazil
 Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries.
 Findings: The study on Foreign Direct Investment (FDI) and economic growth in Brazil found a positive relationship between FDI inflows and GDP growth. FDI contributes to capital accumulation, technology transfer, and sectoral diversification, enhancing competitiveness. However, the impact varies across regions and industries, with disparities in spillover effects. Targeted policies are needed to maximize FDI benefits and promote inclusive growth, addressing regional disparities and socio-economic inequalities.
 Unique Contribution to Theory, Practice and Policy: Dependency theory, modernization theory & institutional theory may be used to anchor future studies on the impact of foreign direct investment (FDI) on economic growth: a study of Brazil. The study should provide practical recommendations for firms and corporate boards to enhance their corporate governance practices based on empirical findings. The study should inform policymakers and regulatory authorities about the implications of corporate governance regulations on firm performance and market competitiveness.

Influence of Authentic Leadership on Employee Innovation and Creativity in Technology Companies in Pakistan

Purpose: The aim of the study was to assess the influence of authentic leadership on employee innovation and creativity in technology companies in Pakistan.
 Methodology: This study adopted a desk methodology. A desk study research design is commonly known as secondary data collection. This is basically collecting data from existing resources preferably because of its low cost advantage as compared to a field research. Our current study looked into already published studies and reports as the data was easily accessed through online journals and libraries.
 Findings: The study explores the impact of authentic leadership on fostering innovation and creativity among employees within technology companies. Authentic leadership, characterized by transparency, ethical behavior, and genuine concern for employees, is found to significantly influence employee innovation and creativity. Leaders who exhibit authenticity create an environment of trust and psychological safety, encouraging employees to express new ideas and take risks without fear of retribution. Such leadership fosters a culture that values diverse perspectives and encourages experimentation, leading to increased innovation and creativity within the organization. Employees under authentic leaders feel empowered to think outside the box, collaborate effectively, and pursue novel solutions to complex problems. Consequently, technology companies benefit from enhanced adaptability, competitiveness, and long-term success as a result of nurturing authentic leadership practices within their organizational structure.
 Implications to Theory, Practice and Policy: Transformational leadership theory, social learning theory and self-determination theory may be use to anchor future studies on assessing the influence of authentic leadership on employee innovation and creativity in technology companies in Pakistan. Develop and implement leadership development programs that focus on cultivating authentic leadership qualities among managers and executives in technology companies. Advocate for the inclusion of authentic leadership principles in corporate governance guidelines and regulations.

A REVIEW OF U.S. FINANCIAL REPORTING SCANDALS AND THEIR ECONOMIC REPERCUSSIONS: INVESTIGATING THEIR BROADER IMPACT AND PREVENTATIVE MEASURES

This study provides a comprehensive analysis of financial reporting scandals in the United States, focusing on their evolution, impacts, and the effectiveness of preventative strategies. The primary objective was to understand the historical development of financial reporting, identify the mechanisms of financial scandals, assess their economic and social repercussions, and evaluate the regulatory and technological responses implemented to prevent such occurrences. Employing a systematic literature review and content analysis, the study analyzed data from academic journals, government publications, and reports from financial regulatory bodies, with a focus on literature published between 2010 and 2023. The key findings reveal that financial reporting scandals have significantly influenced corporate governance and financial regulation, leading to substantial economic and social impacts, including loss of investor trust and market instability. Preventative strategies, notably legislative reforms such as the Sarbanes-Oxley and Dodd-Frank Acts, have been instrumental in enhancing transparency and accountability in financial reporting. Technological innovations have also emerged as vital tools in detecting and preventing financial irregularities. The study concludes that building a resilient financial reporting landscape requires continuous adaptation to technological advancements, development of sophisticated risk management tools, and fostering a culture of ethical reporting. Policymakers and industry leaders are urged to focus on creating balanced legal frameworks that encourage transparency and protect against financial malpractices, thereby ensuring a financial reporting environment that is transparent, accountable, and resilient against future challenges.
 Keywords: Financial Reporting Scandals, Corporate Governance, Regulatory Reforms, Preventative Strategies.

The moderating role of duality split on the relationship between CEO narcissism and earnings management

PurposeThe purpose of this study is to examine the moderating effect of an exogenous corporate governance shock that curbs Chief Executive Officers’ (CEOs) power on the relationship between CEO narcissism and earnings management practices.Design/methodology/approachThe authors performed a quasi-experiment using a differences-in-differences approach to examine Brazil’s duality split regulatory change on 101 Brazilian public firms during the period 2010–2022.FindingsThe main findings indicate that the introduction of duality split curtails the positive influence of CEO narcissism on earnings management, suggesting that this corporate governance regulation may act as a complementary corporate governance mechanism in mitigating the negative consequences of powerful narcissistic CEOs. Further robustness checks indicate that the results remain consistent after using entropy balancing and alternative measures of CEO narcissism.Practical implicationsIn emerging markets, where governance systems are frequently perceived as less than optimal, policymakers and regulatory authorities can draw insights from this enforcement to shape governance systems, reducing CEO power and, consequently, improving the quality of financial reporting.Originality/valueTo the best of the authors’ knowledge, this is the first study to examine whether a duality split mitigates the influence of CEO narcissism on earnings management. Thus, this study contributes to the corporate governance literature that calls for research on the effectiveness of external corporate governance mechanisms in emerging markets as well as the CEO narcissism literature that calls for research on moderating factors that could curtail negative consequences of narcissistic CEO behavior.

Corporate Governance Regulation: A Primer

Corporate Governance Regulation: A Primer

Adapting Corporate Governance for Sustainable Organizational Performance: A Case Study of the Banking Sector in Pakistan amid the COVID-19 Pandemic

Purpose - Corporate governance is a crucial aspect of creating a corporate culture that emphasizes transparency, fairness, and openness. The COVID-19 pandemic has caused a global financial crisis, which has increased attention to corporate governance issues. In light of this, the objective of this study is to examine the impact of corporate governance on the sustainable organizational performance of the banking sector in Pakistan particularly in the context of COVID-19.
 Study Design/Methodology/Approach - This research analyses the annual reports of sample banks and uses secondary data from 2016 to 2022; therefore, there is no doubt about the reliability and validity of the data. This study measured firm sustainable financial performance based on accounting data, using return on assets, return on equity, and earnings per share. The suggested model was investigated by the generalized method of moments through the Arellano-Bond Dynamic Panel-Data estimator.
 Findings - The overall findings of the study reveal that corporate governance components such as board size, audit committee independence, number of board meetings, and chief executive officer duality have a significant impact on organizational performance. Furthermore, the Fixed Affect model indicates that CEO duality has no discernible effect on organizational sustainable performance, while board size, audit committee independence, and the frequency of board meetings all positively affect it.
 Practical and theoretical implications- This study has implications for all stakeholders of the banking system, economic policymakers, and academicians by highlighting the importance of components of corporate governance that enhance overall organizational performance. Theoretically, compliance with corporate governance regulations should lower agency costs, which will improve the overall business's performance now and in the future.
 Originality/Novelty- This study indicates that the use of corporate governance practices enhances and improves the overall sustainable performance of the banking sector. This study adds value to the existing body of literature by considering corporate governance and its association with organizational performance, particularly from the COVID-19 perspective.

Legal regulation of corporate governance in global business: Main problems and current trends

The relevance of the study is determined by the current absence of a clear mechanism for managing transnational companies in global doctrine, leading to various problems. Given this, the purpose of the paper is to identify the main problematic aspects of regulations. To achieve this, methods such as legal hermeneutics, logical analysis, formal- legal, deduction, induction, synthesis, and others were used. The study established that transnational corporations are unique subjects of international economic relations with a complex structure, acting as a unified mechanism, complicating their legal regulation since they are not ordinary legal entities. It is disclosed that one of the key problems is that international legal norms regulating the activities of transnational corporations are recommendatory and not mandatory for implementation. Another issue is the need to strike a balance between the interests of transnational corporations and the countries in which they operate. Accordingly, the conclusion is drawn about the importance of introducing control over the activities of transnational corporations by the countries of origin, aimed at ensuring that transnational corporations adhere to international standards and do not harm the countries that host them. The paper identifies problematic aspects and prospects for the development of transnational corporations in Ukraine and Georgia, providing relevant recommendations. The practical value of the obtained results lies in the development of an international and national mechanism that enables the regulation of problematic aspects and enhances the effectiveness of legal regulation of the activities of transnational corporations