The Political Economy of Corporate Governance

Abstract

We analyze the political determinants of investor and employment protection. Our model predicts that proportional electoral systems are conducive to weaker investor protection and stronger employment protection than majoritarian systems. This prediction is consistent with international panel data evidence. The proportionality of the voting system is significantly and negatively correlated with shareholder protection in a panel of 45 countries, and positively correlated with employment protection in a panel of 21 OECD countries. Other political variables also affect regulatory outcomes, especially for the labor market. The origin of the legal system has some additional explanatory power only for employment protection.

Crossing the streams: HRM in multinational enterprises and comparative HRM

“…Institutionalist arguments head in the same direction. Arguments have been made that differences in such factors as legal systems (Botero, Djankov, La Porta, Lopez-de-Salanes, & Shleifer, 2004;La Porta, Lopez-de-Silanes, Shleifer, & Vishny, 1999, politics (Roe, 2003), or political systems (Pagano & Volpin, 2005) will impact the power of owners of businesses, creating differences between nations. Synthesizing these ideas and adding other institutional and economic differences, the comparative capitalisms literature (e.g., Amable, 2003;Hall & Soskice, 2001;Jackson & Deeg, 2008;Whitley, 1999) points towards differences in institutional arrangements in the economic, social and legal realm at the national level (Hollingsworth & Boyer, 1997) and their relative inertia.…”

Large Foreign Ownership and Firm-Level Stock Return Volatility in Emerging Markets

“…Second, we classify countries according to the anti-director rights index as employed in La Porta et al (1999), which measures the degree of minority shareholder protection. This index was updated to 2002 by Pagano and Volpin (2005) and to 2005 by Spamann (2010). Last, we use an index that measures the extent to which legal rights are effectively enforced in a country, constructed as the principal component aggregation of 3 World Bank indicators (see Kaufmann, Kraay, and Mastruzzi (2004)): the rule of law, regulatory quality, and the control of corruption.…”

Political instability: Effects on financial development, roots in the severity of economic inequality

“…Where the median voter has lost his or her financial assets in, say, the interwar inflation in Europe, but has strong human capital, the 7 median voter will prefer industrial stability, without the disruptions that securities markets bring. Pagano and Volpin (2005) and Gourevitch and Shinn (2005), the latter from the political science literature, argue that shifting coalitions among managers, employees and shareholders can explain the degree to which a polity will provide shareholder protection. Roe (2000Roe ( , 2003, from the legal literature, argues that for Western Europe and East Asia in the first post-War decades, the severity and nature of left-right conflict, and the effort to co-opt internal left-oriented groups and political parties, explain core financial differences in the post-World War II decades among the richer capitalist democracies.…”