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International Corporate Governance and Finance: Legal, Cultural and Political Explanations

Listed author(s):
  • Hamadi Matoussi

    ()

    (University of Manouba, Ariana, Tunisia)

  • Maha Khemakhem Jardak

Corporate governance has drawn much attention with recent managerial misbehavior and corporate scandals. Various laws and reports around the world came up with propositions and regulation to restore confidence and reinforce investor protection. La Porta, Lopez, Shleifer and Vishny (LLSV 1998-2002) built up their theory on the protection of investors by the legal system. Roe’s political theory (2003) challenges the LLSV’s legal theory and provides another explanation for the differences between countries centered on the political variables. The cultural theory (Licht 2001) argues that cross country differences in corporate governance can be explained by differences between national cultures. The objective of this research is to examine the disparity and the determinants of the investor protection regulations around the world. More specifically, we try to explain this disparity by legal and cultural variables. We investigate empirically the disparity of the investor protection regulations measured by the index established by the World Bank across 81 emerging and developed countries in 2006. Our results confirm that combining classifications based on cultural dimensions, religion and on legal families can shed some light on the obscure part of the comparative analysis of corporate governance and investor protection.

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Paper provided by Economic Research Forum in its series Working Papers with number 503.

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Length: 46 pages
Date of creation: Sep 2009
Date of revision: Sep 2009
Publication status: Published by The Economic Research Forum (ERF)
Handle: RePEc:erg:wpaper:503
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  1. Andrei Shleifer & Florencio Lopez-de-Silanes & Rafael La Porta, 2008. "The Economic Consequences of Legal Origins," Journal of Economic Literature, American Economic Association, vol. 46(2), pages 285-332, June.
  2. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27.
  3. repec:hrv:faseco:30747191 is not listed on IDEAS
  4. Mark J. Roe, 1997. "The Political Roots Of American Corporate Finance," Journal of Applied Corporate Finance, Morgan Stanley, vol. 9(4), pages 8-22.
  5. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. " Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
  6. Stulz, Rene M. & Williamson, Rohan, 2003. "Culture, openness, and finance," Journal of Financial Economics, Elsevier, vol. 70(3), pages 313-349, December.
  7. Licht, Amir N. & Goldschmidt, Chanan & Schwartz, Shalom H., 2005. "Culture, Law, and Corporate Governance," International Review of Law and Economics, Elsevier, vol. 25(2), pages 229-255, June.
  8. Dani Rodrik, 2000. "Institutions for High-Quality Growth: What They are and How to Acquire Them," NBER Working Papers 7540, National Bureau of Economic Research, Inc.
  9. North, Douglass C, 1994. "Economic Performance through Time," American Economic Review, American Economic Association, vol. 84(3), pages 359-368, June.
  10. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2003. "Law, endowments, and finance," Journal of Financial Economics, Elsevier, vol. 70(2), pages 137-181, November.
  11. Licht, Amir N. & Goldschmidt, Chanan & Schwartz, Shalom H., 2007. "Culture rules: The foundations of the rule of law and other norms of governance," Journal of Comparative Economics, Elsevier, vol. 35(4), pages 659-688, December.
  12. Mathias Siems & Priya Lele, 2006. "Shareholder Protection: A Leximetric Approach," Working Papers wp324, Centre for Business Research, University of Cambridge.
  13. Chuck C Y Kwok & Solomon Tadesse, 2006. "National culture and financial systems," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 37(2), pages 227-247, March.
  14. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
  15. Oliver E. Williamson, 2000. "The New Institutional Economics: Taking Stock, Looking Ahead," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 595-613, September.
  16. Roe, Mark J., 2006. "Political Determinants of Corporate Governance: Political Context, Corporate Impact," OUP Catalogue, Oxford University Press, number 9780199205301.
  17. Marco Pagano & Paolo F. Volpin, 2005. "The Political Economy of Corporate Governance," American Economic Review, American Economic Association, vol. 95(4), pages 1005-1030, September.
  18. Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, 04.
  19. Rafael La porta & Florencio Lopez-De-Silanes & Andrei Shleifer & Robert Vishny, 2002. "Investor Protection and Corporate Valuation," Journal of Finance, American Finance Association, vol. 57(3), pages 1147-1170, 06.
  20. Djankov, Simeon & La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2008. "The law and economics of self-dealing," Journal of Financial Economics, Elsevier, vol. 88(3), pages 430-465, June.
  21. Simeon Djankov & Oliver Hart & Caralee McLiesh & Andrei Shleifer, 2008. "Debt Enforcement around the World," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1105-1149, December.
  22. repec:hrv:faseco:30728041 is not listed on IDEAS
  23. repec:hrv:faseco:30747162 is not listed on IDEAS
  24. Enrico C. Perotti & Ernst-Ludwig von Thadden, 2004. "The Political Economy of Dominant Investors," Tinbergen Institute Discussion Papers 04-091/2, Tinbergen Institute.
  25. North, Douglass C, 1987. "Institutions, Transaction Costs and Economic Growth," Economic Inquiry, Western Economic Association International, vol. 25(3), pages 419-428, July.
  26. Fligstein, Neil & Choo, Jennifer, 2005. "Law and Corporate Governance," Institute for Research on Labor and Employment, Working Paper Series qt6nt8622j, Institute of Industrial Relations, UC Berkeley.
  27. Mathias M. Siems, 2006. "Shareholder Protection Across Countries – Is the EU on the Right Track?," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 4(3), pages 39-43, October.
  28. Healy, Paul M. & Palepu, Krishna G., 2001. "Information asymmetry, corporate disclosure, and the capital markets: A review of the empirical disclosure literature," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 405-440, September.
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