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Globalization and Similarities in Corporate Governance: A Cross-Country Analysis

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Author Info
Khanna, Tarun
Kogan, Joe
Palepu, Krishna
Abstract

Some scholars have argued that globalization should pressure firms to adopt a common set of the most efficient corporate governance practices, while others maintain that such convergence will not occur because of a variety of forms of path-dependence. With new data on governance in 24 developing countries as well as data on laws protecting shareholders and creditors in 49 developed and developing countries, we search for evidence that globalization is correlated with similarity in corporate governance. We find robust evidence of de jure similarity in governance. Interestingly, this is not driven by convergence to U.S. standards. Rather pairs of economically interdependent countries - especially if the countries are both economically developed - appear to adopt common corporate governance standards, even after accounting for the effects of common legal origin. In contrast to the de jure results, we find virtually no evidence of de facto similarity in corporate governance in a battery of estimations at the country, industry and firm levels. This is consistent with either the proposition that complementarities result in different national systems appropriately having different corporate governance systems, or the proposition that globalization is not strong enough to overcome local vested interests. We conclude that globalization may have induced the adoption of some common corporate governance standards but that there is little evidence that these standards have been implemented.

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Paper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2002-6.

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Length: 49 p.
Date of creation: Sep 2002
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Handle: RePEc:hit:hitcei:2002-6

Note: First Draft: July 1, 2001; This Draft: August 9, 2002
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Rene M. Stulz & Craig Doidge & Andrew Karolyi, 2004. "Why Do Countries Matter So Much for Corporate Governance?," NBER Working Papers 10726, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Hanazaki, Masaharu & Horiuchi, Akiyoshi, 2003. "Have Banks Contributed to Efficient Management in Japan's Manufacturing?," CEI Working Paper Series 2003-22, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  3. Dallago, Bruno, 2003. "Comparative Economic Systems and the New Comparative Economics: Foes, Competitors, or Complementary?," CEI Working Paper Series 2003-24, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  4. Ahn, Sanghoon, 2003. "Technology Upgrading with Learning Cost," CEI Working Paper Series 2003-21, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  5. Gennaioli, Nicola & Rossi, Stefano, 2008. "Judicial Discretion in Corporate Bankruptcy," CEI Working Paper Series 2008-5, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  6. Gennaioli, Nicola & Rossi, Stefano, 2008. "Optimal Resolutions of Financial Distress by Contract," CEI Working Paper Series 2008-6, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
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