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The role of informal institutions in corporate governance: Brazil, Russia, India, and China compared

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  • Saul Estrin

    ()

  • Martha Prevezer

    ()

Abstract

This paper argues that the role of informal institutions is central to understanding the functioning of corporate governance. We focus on the four largest emerging markets; Brazil, Russia India and China – commonly referred to as the BRIC countries. Our analysis is based on the Helmke and Levitsky framework of informal institutions and focuses on two related aspects of corporate governance: firm ownership structures and property rights; and the relationship between firms and external investors. We argue that for China and some states of India, ‘substitutive’ informal institutions, whereby informal institutions substitute for and replace ineffective formal institutions, are critical in creating corporate governance leading to positive domestic and foreign investment. In contrast, Russia is characterized by ‘competing’ informal institutions whereby various informal mechanisms of corporate governance associated with corruption and clientelism undermine the functioning of reasonably well set-out formal institutions relating to shareholder rights and relations with investors. Finally Brazil is characterized by ‘accommodating’ informal institutions which get round the effectively enforced but restrictive formal institutions and reconcile varying objectives that are held between actors in formal and informal institutions.

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File URL: http://hdl.handle.net/10.1007/s10490-010-9229-1
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Bibliographic Info

Article provided by Springer in its journal Asia Pacific Journal of Management.

Volume (Year): 28 (2011)
Issue (Month): 1 (March)
Pages: 41-67

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Handle: RePEc:kap:asiapa:v:28:y:2011:i:1:p:41-67

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Postal: P.O. Box 17, 3300 AA Dordrecht, the Netherlands
Web page: http://www.springerlink.com/link.asp?id=106589

Related research

Keywords: Institutions (informal and formal); Corporate governance; Shareholder rights; Suppliers of finance; Emerging economies; BRIC; M21; L21; P52;

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References

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Citations

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Cited by:
  1. Steve Sauerwald & Mike Peng, 2013. "Informal institutions, shareholder coalitions, and principal–principal conflicts," Asia Pacific Journal of Management, Springer, vol. 30(3), pages 853-870, September.
  2. Tattara, Giuseppe, 2012. "From competitive advantage to dynamic capabilities: small and medium-sized multinationals in Asia," MPRA Paper 39364, University Library of Munich, Germany.
  3. Peng, Mike W. & Su, Weichieh, 2014. "Cross-listing and the scope of the firm," Journal of World Business, Elsevier, vol. 49(1), pages 42-50.
  4. Li, Dan & Miller, Stewart R. & Eden, Lorraine & Hitt, Michael A., 2012. "The Impact of Rule of Law on Market Value Creation for Local Alliance Partners in BRIC Countries," Journal of International Management, Elsevier, vol. 18(4), pages 305-321.
  5. Igor Filatotchev & Gregory Jackson & Chizu Nakajima, 2013. "Corporate governance and national institutions: A review and emerging research agenda," Asia Pacific Journal of Management, Springer, vol. 30(4), pages 965-986, December.
  6. Kiran Ismail & David Ford & Qingsheng Wu & Mike Peng, 2013. "Managerial ties, strategic initiatives, and firm performance in Central Asia and the Caucasus," Asia Pacific Journal of Management, Springer, vol. 30(2), pages 433-446, June.
  7. Traikova, Diana, 2013. "Determinants of non-farm entrepreneurial intentions in a transitional context: Evidence from rural Bulgaria," Studies on the Agricultural and Food Sector in Central and Eastern Europe, Leib­niz Institute of Agricultural Development in Central and Eastern Europe (IAMO), volume 72, number 72.
  8. Steven Globerman & Mike Peng & Daniel Shapiro, 2011. "Corporate governance and Asian companies," Asia Pacific Journal of Management, Springer, vol. 28(1), pages 1-14, March.
  9. Daphne Yiu & Jun Su & Yuehua Xu, 2013. "Alternative financing and private firm performance," Asia Pacific Journal of Management, Springer, vol. 30(3), pages 829-852, September.
  10. Yina Mao & Chi-Sum Wong & Kelly Peng, 2013. "Breaking institutionalized corruption: Is the experience of the Hong Kong Independent Commission Against Corruption generalizable?," Asia Pacific Journal of Management, Springer, vol. 30(4), pages 1115-1124, December.
  11. Martin Wielemaker & Eric Gedajlovic, 2011. "Governance and capabilities: Asia’s entrepreneurial performance and stock of venture forms," Asia Pacific Journal of Management, Springer, vol. 28(1), pages 157-185, March.
  12. Anand Saxena, 2013. "Transgenerational succession in business groups in India," Asia Pacific Journal of Management, Springer, vol. 30(3), pages 769-789, September.
  13. Mimo Draškovic & Jelena Stjepcevic, 2012. "Institutional Framework Of Corporate Governance With Reference To The Former Yugoslav Transition Economies," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 8(4), pages 27-41.
  14. Giuseppe Tattara, 2012. "Flexible Strategy for Small and Medium-sized Multinationals in Asia," Working Papers 2012_06, Department of Economics, University of Venice "Ca' Foscari", revised 2012.

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