Law and Finance in Transition Economies

Pistor, Katharina; Raiser, Martin; Gelfer, Stanislaw

doi:10.1111/1468-0351.00047

Cited by 514 publications

(110 citation statements)

References 56 publications

(43 reference statements)

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“…Moreover, the effective enforcement mechanisms also dictate mandatory information disclosure and regulate market intermediaries (Black, 2001;Coffee, 1999;Levine, 1998;Levine & Zervos, 1996;Pistor, Raiser, & Gelfer, 2000), thus alleviating information asymmetry and reducing information cost (Black & Kraakman, 1996;La Porta et al, 1997, 1998. In addition, on the basis of clear legal requirements of board duties and information disclosure, capital markets can serve as an effective external governance mechanism (Black, 2001;Coffee, 1999;Levine, 1998;Levine & Zervos, 1996;Pistor et al, 2000) through allocative and disciplinary measures and takeover mechanisms (Samuel, 1996;Singh, 2003). For example, the stock market and the market for corporate control can improve corporate governance and firm performance by replacing inefficient managers and transferring the firm assets to those who can manage them more efficiently through hostile takeovers, management buy-outs, and leveraged buy-outs (Jensen, 1988;Shleifer & Vishny, 1986).…”

Section: National Governance Systemmentioning

confidence: 99%

National Governance System, Corporate Ownership, and Roles of Outside Directors: A Corporate Governance Bundle Perspective

Yoshikawa

Zhu

Wang

2014

Corporate Governance

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Manuscript Type: ConceptualResearch Questions/Issues: We explore why and how the different combinations of governance practices at national level, such as the legal system, conduct codes, and capital markets, and at firm level, such as various types of controlling shareholders, enable or constrain outside directors to engage in their monitoring and resource provision roles. Building upon such analysis, we develop a new taxonomy of corporate governance systems according to the different configurations of a set of interdependent governance characteristics, including national governance mechanisms, identity of block shareholders, and functions of outside directors. Research Insights: This study enriches the growing body of research on governance complementarity and substitution by highlighting the role of bundles of governance practices in influencing directors' engagement in governance behavior, and consequently advancing our understanding of variation in corporate governance systems across and within countries. Theoretical/Academic Implications: This paper demonstrates that the roles of outside directors depend on the interaction between a bundle of governance mechanisms rather than any individual mechanisms. The paper also goes beyond the traditional governance models based on the national context and highlights that interdependencies of corporate governance practices play an important role in explaining the diversity and variation of corporate governance arrangements across firms in both industrialized economies and emerging markets. Practitioner/Policy Implications: This paper provides insights to policymakers by suggesting that not all the governance bundles are conducive to managerial monitoring and resource provision by outside directors.

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Section: National Governance Systemmentioning

confidence: 99%

National Governance System, Corporate Ownership, and Roles of Outside Directors: A Corporate Governance Bundle Perspective

Yoshikawa

Zhu

Wang

2014

Corporate Governance

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“…Another stream in the corporate governance research has stressed the role of enforcement, especially in countries with weak institutions, such as transition economies and emerging markets (Berglöf & Pajuste, 2003;Berglöf & von Thadden, 1999;Pistor, 2000;Pistor, Raiser, & Gelfer, 2000). Furthermore, Berkowitz, Pistor, and Richard (2003) have shown that a simple transplantation of the legal rules may not work because they need to be adapted to local societal conditions.…”

Section: Introductionmentioning

confidence: 99%

Social Norms, Social Cohesion, and Corporate Governance

Boytsun

Deloof

Matthyssens

2010

Corporate Governance: An International Review

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International audienceManuscript Type: Empirical Research Question/Issue: We study the relationship between informal rules (represented by social norms and social cohesion in a community) and corporate governance. A community is a large social unit characterized by a distinct set of informal rules. Specifically, three hypotheses are tested: (1) Communities with stronger social norms will have more open firm-level corporate governance, (2) More socially cohesive communities will have more open firm-level corporate governance, and (3) The relationship between social norms and corporate governance will be mediated by social cohesion. Research Findings/Insights: Unlike previous studies, we use data from a single, culturally diverse country, Ukraine, in order to isolate the effect of informal rules. The country's provinces are used as proxies for communities. We develop our measures of social norms and social cohesion by performing a factor analysis on the measures commonly used in previous research (social capital, religiosity, total fertility, ethnic homogeneity, linguistic homogeneity, and homicide rate). All three hypotheses are supported, whether using composite or individual measures of social norms and cohesion. The mediation is partial, suggesting that the hypothesized effect of social norms on corporate governance may (i) partly come through cohesion and (ii) partly be direct. The results are highly significant and robust, and they hold very well when controlled for economic development, firm characteristics, and industry. Theoretical/Academic Implications: We contribute to the large literature on institutional determinants of corporate governance by proposing that informal rules may have a substantial impact on firm-level corporate governance. We also identify specific sources of informal rules: social norms and cohesion. Testing our insights in other countries and in cross-country settings would help to further understand what rules matter for corporate governance and whether informal rules may substitute for formal rules. Another research opportunity, perhaps best exploited through case-based research, is the deeper enquiry into the very mechanism by which informal rules may affect firm-level corporate governance. Practitioner/Policy Implications: Manipulating informal rules, such as norms and cohesion, is an unlikely option for corporate governance reform. If that is the case, the policy should consist in adjusting the governance system to fit them. As this fit will differ across communities and countries, international convergence of corporate governance appears unlikely. Keywords: Corporate Governance, Institutions, Informal Rules, Social Norms, Social Cohesio

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“…where X k,jt is a group of control variables that affects ownership concentration after listing. Following Pistor, Raiser and Gelfer (2000), we use the contemporaneous scores for the legal rules variables, Tlaw , to explain the ownership concentration. For legal enforcement, because of the lack of data before 2000 and the persistence of the pecking order of regional legal environment across time (e.g., the Pearson correlation of the legal environment index from 2000 to 2003 ranges from .80 to .99), we use the average of the 2000 to 2003 legal environment indices for each province in our analyses following the method taken by Fan et al .…”

Section: Methodsmentioning

confidence: 99%

State Control, Legal Investor Protection, and Ownership Concentration: Evidence from China

Shi-nong

Yuan

2009

Corporate Governance

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Manuscript Type: EmpiricalResearch Question/Issue: To control for the omitted-variables and aggregation biases problem existing in previous crosscountry studies, our paper investigates the relationship of ownership concentration and legal investor protection across regions and over time in one emerging economy, China, during the period 1992 to 2003. Moreover, this paper examines whether state control affects this relationship. Research Findings/Results: For state-controlled firms, we cannot find the typical inverse relationship between ownership concentration and legal investor protection documented by La Porta, Lopez-de-Silanes, Shleifer, and Vishny (1998), since state per se works as a substitute for formal legal investor protection in protecting property rights by exploiting political power. However, for non-state-controlled firms, the inverse relationship does hold. Theoretical Implications: Our findings suggest that the nature of the controlling shareholder should be taken into account when examining the relationship between ownership concentration and legal investor protection. Moreover, our findings give new insights, especially to the study on other emerging economies that share similar characteristics with China in terms of legal development and government control. Finally, the cross-region study within one country provides a new perspective on the research in this area. Practitioner Implications: First, to provide a level playing field for different types of investors, the state's dual role of controlling shareholder and political power holder should be separated. Second, it is important to build up a good legal system to protect investors in order for a country to develop its capital markets, especially for the development of the non-state sector.

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Law and Finance in Transition Economies

Cited by 514 publications

References 56 publications

National Governance System, Corporate Ownership, and Roles of Outside Directors: A Corporate Governance Bundle Perspective

National Governance System, Corporate Ownership, and Roles of Outside Directors: A Corporate Governance Bundle Perspective

Social Norms, Social Cohesion, and Corporate Governance

State Control, Legal Investor Protection, and Ownership Concentration: Evidence from China

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