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This paper develops an organizational approach to corporate governance and assesses the effectiveness of corporate governance and implications for policy. Most corporate governance research focuses on a universal link between corporate governance practices (e.g., board structure, shareholder activism) and performance outcomes, but neglects how interdependencies between the organization and diverse environments lead to variations in the effectiveness of different governance practices. In contrast to such closed systems approaches, we propose a framework based on open systems approaches to organizations, which examines these organizational interdependencies in terms of the costs, contingencies, and complementarities of different corporate governance practices. These three sets of organizational factors are useful in analyzing the effectiveness of corporate governance in diverse organizational environments. We also explore the impact of costs, contingencies, and complementarities on the effectiveness of different governance aspects through the use of stylized cases and discuss the implications for different approaches to policy such as soft law or hard law .

Within the backdrop of comparative corporate governance research, we draw on the managerial reporting and impression management literatures to examine how the type, level, and nature of foreign shareholders, infused with their own governance logic, influence initial managerial earnings optimism and how foreign ownership shapes earnings guidance in a stakeholder-oriented setting. Drawing on Japanese data, and addressing endogeneity concerns, our results show that under the presence of foreign owners, managers are more optimistic in their initial earnings forecasts, but that in subsequent revisions they are more likely to provide timely adjustments of their earnings forecast and avoid making last-minute adjustments. This research illustrates how foreign practices travel across borders and contributes to understanding triggers to governance and strategic changes.

We provide an analysis of the costs and benefits of blockholding in Europe, where it is a dominant, but certainly not universal, corporate governance strategy for shareholders of publicly listed firms. We find that the effectiveness of blockholding is conditioned by the specific labor institutions that distinguish European countries from the rest of the world, and that these institutional effects involve both competition and cooperation between blockholders and collective labor interests. We also find that relational blockholders are better able to cope with, or benefit from, these institutional effects than arm's-length blockholders. Empirically, we use advanced meta-analytic methods on a total sample of 748,569 firm-year observations, derived from 162 studies covering 23 European countries.

Purpose The past few decades have seen a gradual convergence in corporate governance norms the world over, entailing a discernible shift towards shareholder primacy models. It holds particularly true of developing countries, many of which have steadily amended corporate governance norms to enhance the scope of shareholder rights. This is usually justified through the rationale that increasing protection for foreign investors and shareholders would mean greater investment in capital market and overall financial market development. In India, the shift coincides with a series of fundamental economic and financial policy reforms initiated in the 1990s: collectively and loosely referred to as “liberalisation”, this process marks a paradigm-shift from a tightly controlled welfare economy to one considerably more laissez-faire in its orientation. A fallout of which was that the need to attract and sustain foreign investments acquired an unprecedented significance. The purpose of this paper is to help the readers understand in this larger context the corporate law reform initiatives in India, particularly those pertaining to shareholder rights and allied issues. Design/methodology/approach This paper empirically tests the hypothesis that enhanced shareholder protection leads to greater levels of investments, and financial developments generally. It then uses regression analysis to detect if the change in corporate governance, making it more shareholder-friendly, has had any effect on growth in financial market. It is divided into two broad parts. The first tracks the evolution of corporate governance norms in India. A robust qualitative and quantitative analysis is used to determine the tilt towards a shareholder primacy regime that Indian corporate governance regime now displays. The second chapter deals with the regression analysis where the outcome variable is financial market growth, and explanatory variable is the change in the governance regime with relevant control variables. Findings The authors find that change in shareholder primacy corporate governance has little effect on financial market growth in India. The authors would suggest that instead of changing the law in books, more emphasis should be given to implement those regulations and increase the overall rule of law. Originality/value This is the first time that such a wide-scale study has been conducted in India, using Bayesian methods. It ought to be of immense value to professionals and academics both.

In this study, the authors investigate why CEOs seem to be held more accountable for poor firm performance in some countries than others. The article integrates research from comparative corporate governance and agency theory to identify and evaluate four fundamental assumptions underlying most theoretical arguments linking performance and dismissal: (1) CEOs are personally responsible for firm performance outcomes; (2) boards/owners have the power to dismiss CEOs; (3) firm performance measures are meaningful; and (4) suitable alternative candidates for the CEO role are available. The authors argue that CEO accountability will vary in line with the extent to which these assumptions are more or less valid from one country to the next. They provide robust evidence - across both marketbased and accounting-based measures - that CEOs are more likely to be dismissed following poor firm performance in countries where managerial discretion is high, where firm performance measures are more meaningful, and where the CEO labor market is more developed. However, the authors do not find support for their prediction that CEO accountability varies in line with cross-national differences in CEO power asymmetry.

PurposeThe global financial crisis of 2007-2008 prompted a significant debate on corporate governance and shareholder empowerment. A question arises as to whether shareholders ought to be further empowered to have a greater influence over the companies’ activities. Yet, it is not self-evident that shareholder empowerment ensures better-run companies’ corporate activities. Thus, the purpose of this paper is to critically examine, identify and explain the corporate regulation forms and control collectively to evaluate the effectiveness of shareholder empowerment fully.Design/methodology/approachTo do so, this paper sets out a comparative analysis approach between two jurisdictions, the UK and Delaware in the USA. The paper further addresses by undertaking three case studies; Barclays Plc which illustrated the Comply or Explain role, AVIVA (2012) that concentrated on the impact of the shareholder revolt, and the case of Hills Stores Co. v. Bozic (2000), which involved a claim brought by shareholders on the grounds of a breach of fiduciary duty.FindingsThis paper argues that the shareholder empowerment theoretically provides an effective means through which corporate activities can be regulated. However, to do this, account must be taken that a distinction should be made between long-term and short-term investors to encourage shareholder engagement by responsible long-term investors. Furthermore, the shareholders can exercise their powers effectively and influence the Board’s decision to award executive compensation.Originality/valueThis paper offered two distinct contributions: assessing whether in times of crisis shareholder empowerment represents a way to regulate corporate activities and by assessing the distinction between the perception of shareholder empowerment and the reality in practice.

Purpose – This review paper aims to compare the various dimensions in the finance literature pertaining to the Anglo-Saxon Model (Stockholder Model) prevalent in the USA and the UK with the German Model (Stakeholder Model) of corporate governance prevalent in Germany and continental Europe. The present study identifies different strands of research on the various dimensions of these models, along with aspects of governance in emerging economies and the phenomenon of the convergence of these governance mechanisms. Design/methodology/approach – The literature review on corporate governance models has been carried out on the themes of internal and external governance mechanisms. The review considers agency theory along with principal–principal (PP) conflicts as the fundamental blocks explaining the need for governance structures. Findings – The traditional models of governance, along with the incorporation of PP conflicts, will result in a hybrid model inculcating the best of both the traditional models. However, convergence in the true sense may not be possible owing to fundamental differences pertaining to cultural, economic, legal and socio-economic aspects of the firm. Originality/value – This paper proposes a framework incorporating the interplay of managerial talent and controlling shareholders to understand the governance system that may be applicable for firms in emerging economies.

We propose a social perspective emphasizing the opportunities and constraints of bank-firm relationships to understand the determinants of relationship banks' performance, using Japanese banks to test our theory. Using social exchange and role theories, we found banks that have strong social relationships performed differently during Japan's macroeconomic expansion and contraction cycles. However, our results indicate that social exchange and role relationships are context-specific: banks benefited from internationalization during a domestic macroeconomic expansion as a result of their home-country social relationships, but they were less constrained by the same social relationships in their international operations during a domestic macroeconomic contraction.

Recent research work has put forward the concept of \"national system of corporate governance\" to describe the complex architecture of legal rules, economic mechanisms and mentalities which constrain managerial discretion in a different way according to the country considered. The role played by the legal system in this set of mechanisms is particularly important and, as part of the legal system, the bankruptcy law performs a specific function: designed as a governance device for financially distressed firms, it also acts as a monitoring mechanism for healthy ones. The aim of this paper is to investigate the mechanisms of corporate governance in the context of bankruptcy in a comparative perspective. Relying on a broad definition of corporate governance (i.e., one which takes into account the influence of all stakeholders on managerial discretion), we first examine the insolvency codes of five countries (France, Germany, Japan, the United Kingdom and the United States). The stance of the law (creditor-oriented vs. debtor-oriented) is discussed in relation to the legal tradition of each country. We then study the way bankruptcy law in each country articulates with the other governance mechanisms. For that purpose, a typology of those mechanisms is used, based on the type of device each kind of stakeholder is able to activate. Results of both theoretical and empirical studies on bankruptcy are used to understand which of the different devices are used in each country. The comparative approach underlines the impact of institutional differences on organizations through the incentives sent to their stakeholders. [PUBLICATION ABSTRACT]