Home country institutions and exports of firms in transition economies: Does innovation matter?

We draw on institutional theory and the resource-based view to analyze the relation between home-country governance imperfections and the export intensity of firms in transition economies, including an examination of the moderating role of innovation. We propose that greater governance imperfections result in lower export intensity and that innovation mitigates the constraints of operating with weak home-country institutions. Analyses of panel data from the Business Environment and Enterprise Performance Survey (BEEPS) on firms from transition economies provide support for our arguments. Our findings allow us to conclude that although firms from transition economies face difficulties to export due to the regulatory constraints of their home countries, a strategy based on innovation represents a viable way of overcoming these limitations.     

The substitution of governance mechanisms in the evolution of family firms

This paper examines how family firms substitute corporate governance with family governance and self-governance at different stages of their development. We argue that the types of agency problems that family firms face as they pass from one generation to the next determine the extent to which these mechanisms can be used as substitutes for one another. Our empirical investigation provides evidence that in the early stages of a family firm's life cycle, instruments of self-governance lessen the need for mechanisms of corporate governance, whereas in the later stages, instruments of family governance can substitute for mechanisms of corporate governance.     

Portfolio Flows to Emerging Capital Markets: Do Corporate Transparency and Public Governance Matter?

This paper focuses on flows to emerging capital markets (ECMs) and examines the importance of corporate transparency and public governance in attracting portfolio flows to ECMs. This paper's empirical investigation centers on the hypothesis that ceteris paribus, ECMs with better quality accounting standards and good governance attract higher levels of portfolio equity and bond flows. To assess the incremental impact of each of these factors, a pooled time series, cross‐sectional model was econometrically tested for 17 ECMS over the 1998–2002 time period. Our empirical analysis demonstrates a positive association between public governance, corporate transparency, and portfolio flows after controlling for other macroeconomic factors. The results suggest that good public governance and high accounting quality are important determinants of portfolio flows to ECMs. Finally, the paper establishes that while portfolio equity flows are significantly attracted to ECMs with strong democratic institutions, there is no significant association between portfolio bond flows and the presence of democratic institutions.     

Asian Family Firms through Corporate Governance and Institutions: A Systematic Review of the Literature and Agenda for Future Research

Although the corporate governance model of Asian family firms has recently gained increased attention, it remains unclear how these firms’ corporate governance mechanisms (and their effectiveness) differ from those of family firms in the western world. Drawing upon a comparative institutional perspective, this paper systematically reviews 148 published articles in peer‐reviewed journals from 1980 to 2015. The aim of this paper is to contribute to the understanding of institutional complementarities that constitute informal governance mechanisms adopted by Asian family firms by considering a wider set of institutional factors (i.e. political environment, cultural values and social norms) embedded in the Asian context. The main findings suggest that: (i) given the lack of market‐supporting institutions and the presence of strong political control over Asian economies, family firms tend to cultivate political connections to respond to the failure of legal systems; (ii) Asian family firms still rely heavily on personal networks (e.g. guanxi) to reduce uncertainty, strengthen business ties, and gain access to external resources; and (iii) cultural values and social norms (e.g. ‘face’ saving, reputational concerns and adult child adoption) lead to functionally equivalent corporate governance mechanisms in Asian family firms. The downstream effects of such mechanisms are also discussed, and future research avenues are identified.     

中国上市公司治理水平及其对绩效影响的实证研究

本文构建了中国上市公司治理水平的评价指数,并据此对中国上市公司治理水平的现状、影响因素以及与绩效的关系进行了实证分析。研究结果表明:我国上市公司治理水平总体不高;股权结构对公司治理水平具有显著影响,政府控股型公司的治理水平最高,国有资产管理机构控股型公司的治理水平要高于国有法人控股型公司,而一般法人控股型及股权分散型公司的治理水平介于前两者之间 , 但不存在显著差异;公司治理水平对净资产收益率具有正向影响但对市净率却具有负向影响。本文最后给出了上述研究结论的政策意义。     

基于联立方程模型的公司治理溢价研究——兼谈如何检验公司治理评价指标的有效性

公司治理溢价研究可以揭示公司治理与企业价值之间的互动机理,不仅有助于深化和丰富公司治理理论,为上市公司优化公司治理指明方向和重点,而且有助于投资者全面评估企业价值.而对公司治理的客观评价是公司治理溢价研究中的关键问题,本文在以往研究成果基础上,以上证公司治理板块的评选结果为参照样本,给出了检验公司治理评价指标有效性的科学方法,进而验证了以DEA方法构建的公司治理效率值指标的有效性;在此基础上利用联立方程模型对公司治理溢价进行研究,解决了公司治理与企业价值之间可能存在的内生性问题;以2007年中国沪市578家A股公司为样本对联立方程模型进行估计.结果表明,中国股票市场存在公司治理溢价,公司治理效率值每增加0.1,流通盘市场附加值就会有37.2%的溢价.     

Financial Reporting,Private Disclosure and the Corporate Governance Role of Financial Institutions

This paper explores how large UK financial institutions (FIs) pursued a private corporate governance agenda with their portfolio companies. It also investigates the role of financial reporting in private and public corporate governance. The case financial institutions argued that the limited quality of public information, especially in financial reports, was a major constraint on their ability to act in fund management and corporate governance roles. However, the financial reporting cycle determined a private institutional and company meeting cycle and this created opportunities for private information collection and for governance influence by FIs. In addition, the perceived limitations of public governance mechanisms such as voting encouraged private governance approaches. As a result, the case financial institutions had the incentive and the means to improve the quality of their sources of corporate information and to obtain a competitive edge over other financial institutions and the market through their direct contact with companies. Despite the limitations of public information, the paper reveals how public disclosure in financial statements and the financial reporting cycle played a central role in corporate governance. Public sources of information were combined with private sources to create a financial institutional knowledge advantage. The institutions used this knowledge to diagnose problem areas in strategy, management quality, and the effectiveness of the board, and their impact on financial performance. The financial reporting cycle meant that the quasi insider financial institution had the access opportunity and the joint public/private insight to influence companies across a wide corporate governance agenda and in a range of corporate circumstances. The case institutions exploited these private access and knowledge advantages for investment purposes and for Cadbury style corporate governance purposes. Thus, the private governance process was critically dependent on the FI knowledge advantage, which in turn relied on both financial reports and private disclosure. This wide ranging governance behaviour by institutions corresponds to recommendations subsequently made by the Hampel report in 1998 concerning UK corporate governance. The paper ends by exploring how the private institutional and company meeting agenda can suggest new directions for financial reporting and public disclosure and how this can further improve public and private corporate governance.     

The research frontier in corporate governance

In this paper we attempt to identify the research frontier in corporate governance using three different approaches: (1) what challenges does the financial crisis 2007–2009 pose for corporate governance research? We show that the financial crisis is a huge natural experiment which has exposed gaps in our knowledge of corporate governance and is likely to lead of a rethink of central concepts like shareholder value, debt governance, and management incentives (2) what do we know and what do we need to how about the impact of national institutions on corporate governance? (3) What research questions are raised by a focus on current corporate governance practices?     

Self-regulation of corporate governance in Russian firms: translating the national standard into internal policies

We consider how firms develop internal corporate governance policies based on external nation-wide standards. Flexibility in interpreting external standards allows firms to develop internal regulations focused on governance procedures that are only loosely coupled with expected governance outcomes. Our results demonstrate that firms tend to adopt less restrictive policies than what is recommended by the national standard and are more willing to adopt policies regulating governance procedures than policies regulating governance decisions. We also argue that the process of translating external standards into internal guidelines is affected by firm-specific characteristics and explore factors that determine to what extent firms switch the focus of internal policies from regulating governance decisions to regulating governance procedures.     

Corporate governance and stakeholder conflict

The stakeholder management literature is dominated by the ‘shareholder value’ and ‘inclusive stakeholder’ views of the corporation. Each views the governance problem in terms of inter-functional conflicts between stakeholder groups, such as between investors and managers or managers and employees, and rests on the assumption of an idealized corporate structure characterized by the separation of ownership from management. Our review of corporate governance and stakeholder conflict shows that such functional-based characterization is too simplistic and fails to account for important intra-functional conflict. Through a comparative review that considers managerial, stakeholder and family systems of governance, we demonstrate that, while the modality of conflict varies by system, substantial intra-functional conflict is endemic to each. We integrate the findings of the agency and comparative stakeholder theories of corporate governance to offer an authority-based framework with three different governance structures that offers complementary insights into stakeholder conflicts. Thus, our study highlights the important, but often neglected, intra-stakeholder type of conflict in various organizations and provides a basis for understanding their various manifestations and consequences under the different systems of governance.     

A cyclical view of the relationship between corporate governance and strategic management

The vast majority of research on the relationship between corporate governance and strategic management focuses on the impact of corporate governance on strategic management. In this article we propose a cyclical model, highlighting that strategic decisions can also affect corporate governance through shaping firm ownership structure. We discuss the impacts of strategic decisions on firm ownership structure and corporate governance in the contexts of publicly traded firms, private firms, and the privatization of state-owned enterprises. We hope that our cyclical model can promote researchers to develop a more complete view about the relationships between strategic management, ownership structure, and corporate governance.     

The impact of corporate sustainability performance on information asymmetry: the role of institutional differences

This paper empirically investigates whether corporate sustainability performance (CSP) affects information asymmetry (IA) for European firms listed in the STOXX Europe 600 from 2002 to 2013. We find a significantly negative effect of CSP on IA. By exploiting institutional differences between the European countries, we determine that the negative effect of CSP on IA is more pronounced in liberal market economies compared to coordinated market economies, thus pointing to a substitutive effect of CSP and economic coordination. Further, the impact is greater in countries with stricter disclosure requirements. In such countries, there is generally a greater appetite for company-specific information. However, disclosure requirements fulfil this need only partially because they concentrate on the corporate governance dimension of corporate sustainability. Hence, information on the social pillar especially matters to investors in a complementary manner and drives the overall effect. Our study contributes to the literature on the positive capital market effects of CSP by showing the proposed effect in European capital markets and the institutional determinants of its strength.     

The Role of Financial Institutions in the Corporate Governance of Listed Chinese Companies*

This paper explores the role of Chinese financial institutions in the corporate governance of listed companies through interviews with both senior managers of financial institutions and board directors of listed companies. Our results show that, while most securities companies are passive investors, a good proportion of the active mutual funds help their portfolio companies prepare financial forecasts, standardize their operations, raise external funds, strengthen their company image in the capital markets, and sometimes intervene in corporate issues. This limited role can be attributed to a number of factors specific to the Chinese context including highly concentrated state ownership, an immature regulatory environment, inadequate transparency and disclosure of financial information, and weak corporate governance within financial institutions themselves. It could also be affected by several other factors that are considered to cause institutional passivity in developed countries such as conflicts of interest, monitoring costs and lack of expertise.     

Financial Ownership,Diversification and Firm Profitability in Japan

The Japanese system of corporate governance andin particular the role played by banks andother financial institutions have been thesubject of considerable research andcontroversy in recent years. We estimate theimpact of equity ownership by financialinstitutions on firm performance in Japan for1986–1991, a period that precedes many of theproblems of the ensuing decade. We find thatwhile ownership by financial institutions isassociated with unprofitable diversification,such ownership is, on balance, positivelyassociated with firm profitability. Someimplications of these findings for Japan'sunique system of governance are discussed.     

International Evidence on the Determinants of Organizational Ethical Vulnerability

This paper proposes a model to explain what makes organizations ethically vulnerable. Drawing upon legitimacy, institutional, agency and individual moral reasoning theories we consider three sets of explanatory factors and examine their association with organizational ethical vulnerability. The three sets comprise external institutional context, internal corporate governance mechanisms and organizational ethical infrastructure. We combine these three sets of factors and develop an analytical framework for classifying ethical issues and propose a new model of organizational ethical vulnerability. We test our model on a sample of 253 firms that were involved in ethical misconduct and compare them with a matched sample of the same number of firms from 28 different countries. The results suggest that weak regulatory environment and internal corporate governance, combined with profitability warnings or losses in the preceding year, increase organizational ethical vulnerability. We find counterintuitive evidence suggesting that firms’ involvement in bribery and corruption prevention training programmes is positively associated with the likelihood of ethical vulnerability. By synthesizing insights about individual and corporate behaviour from multiple theories, this study extends existing analytical literature on business ethics. Our findings have implications for firms’ external regulatory settings, corporate governance mechanisms and organizational ethical infrastructure.     

Unintended agency: Impression management support as a trigger of institutional change in corporate governance

In this paper we describe an emergent process of institutional change in which institutional entrepreneurs are unintentional contributors to the change process. Our theory suggests how change in the predominant institutional logic of corporate governance at public U.S. companies resulted not from deliberate attempts by corporate leaders to change the criteria by which governance is evaluated, but from the cumulative efforts of top executives to provide “impression management support” (IM support) for individual leaders of other firms. We first discuss how IM support has spread among corporate leaders through generalized social exchange. Then we suggest how individual leaders, in seeking to persuade journalists about the quality of corporate leadership at particular other firms, tend to invoke evaluative criteria that deviate from the prevailing institutional logic of governance. We further suggest how the rhetoric of IM support instigated a cascading social influence process that has contributed to changing perceptions about corporate governance among a broad range of other corporate stakeholders. We discuss the implications of our model for sociological perspectives on corporate governance and the corporate elite. Finally, we consider how the occasional negative commentary by corporate leaders about their peers, in combination with IM support, helps to sustain the credibility of the social system in which leaders, journalists, and other information intermediaries operate.     

Corporate Governance in China—Is Economic Growth Potential Hindered by Guanxi?

Despite the opening of the market and partial privatization of state‐owned companies in China, the state still represents the controlling shareholder in larger companies. By analyzing the weaknesses of Chinese corporate governance we illustrate the framework for harmful corruption. China is characterized by a weak legal system and strong influences of traditions such as guanxi. In this article we analyze the influence of guanxi on the Chinese corporate governance system. We find that guanxi is in general a double‐edged sword, but business‐to‐government guanxi in particular can harm the weak Chinese corporate governance system and hamper its further economic development and growth.     

The Mirror Effect: Corporate Social Responsibility,Corporate Social Irresponsibility and Firm Performance in Coordinated Market Economies and Liberal Market Economies

We investigate the classic management debate of agency versus institutional pressures through the application of the varieties of capitalism literature. In particular, we examine corporate social responsibility (CSR), corporate social irresponsibility (CSiR) and their relationships with firm performance in two types of capitalist systems: coordinated market economies (CMEs) and liberal market economies (LMEs). We note that while the CSR literature has tended to develop a balanced view on the influence of agency and institutional pressures, the CSiR literature has tended to emphasize the influence of agency. The latter appears to be a result of the fundamental attribution bias, where irresponsible corporate behaviours are attributed to individual managers or organizations, rather than the institutional environment. Our results, which include five years of data across 16 countries, show significantly greater CSR and significantly lower CSiR in CMEs compared with LMEs. Further, we find a positive relationship between CSR and firm performance in CMEs but not LMEs, and a negative relationship between CSiR and firm performance in LMEs but not CMEs. Overall, our results demonstrate the influence of the institutional environment, suggesting that corporate behaviours mirror the external environment.     

Social accounting as stakeholder knowledge appropriation

Heeding the call for socio-political explorations of the social accounting project, we use the analytical lens of knowledge appropriation to explore power and contest in social auditing. We develop a knowledge appropriation model comprising three stages: knowledge creation, knowledge generation and outcome distribution, which we then use to analyze an exemplar case. We argue that, despite asymmetries of power and managerial prerogative, deficient stakeholder involvement in the creation and distribution stages renders social auditing ineffective for governance as either a stakeholder account or a strategic management system. We conclude that embedded stakeholder involvement in knowledge creation processes is essential for social auditing to be effective as corporate governance.     

Institutional Change and Debt-based Corporate Governance: A Comparative Analysis of Four Transition Economies

Countries in transition now represent a significant sector of the international political economy. One of the challenges that they face in moving towards market-based systems and institutions is that of transforming the structure of business enterprises into forms more compatible with capitalist economies. Corporate governance is an important part of this. We argue that, certainly during an interim stage whilst equity markets are weak or non-existent, debt finance has a useful role to play. However for this to be possible there are some important institutional changes that are necessary in order to provide the infrastructure within which debt finance can operate effectively and efficiently. We then present an overview and evaluation of the progress of change in four selected transition countries. This revised version was published online in July 2006 with corrections to the Cover Date.