Cultural Influence in the Practice of Corporate Governance in Emerging Markets

Abstract

Corporate governance seeks to ensure a fair return on the investment and it also establishes incentives and procedures that meet the interests of shareholders while respecting other stakeholders' interests in the organization. Corporate governance has become one of the hottest topics of discussion in the circle of regulators, practitioners and academic in the aftermath of recent financial crisis. The financial crisis pint points the lack of corporate governance practice and that many institutions have taken heed to ensure compliance of corporate governance to win back the confidence of investors and regulators. Well-developed theories like agency theory, stewardship theory, hegemony theory and transaction cost theory could be used to understand the concept of corporate governance. The aims of this research are to anlayse the concept of corporate governance and see the level of adherence to corporate governance in emerging economies. The research also endeavors to link the cultural influence in the adoption of corporate governance. As there are only limited researches so far on the corporate governance and related issues in emerging markets, this research would contribute to the existing knowledge by filling the gap on corporate governance in emerging markets.

The Impact of the Culture on Corporate Governance (Board Structure) in Jordan Context

“…This is because the culture of the organization is affected decision-makers particularly their values. Thus, this affects corporate governance "in [2]". Empirical studies have been reviewed on this issue.…”

“…With regard to the board of directors, the culture of the country plays a critical role in influencing it, as "in [3]" noted that Western Europe supports gender diversity in the boards of directors. Whereas in developing countries is characterized by a weak control as well as weak governance, which negatively affects foreign investment "in [2]", where investors prefer large firms with strong corporate governance that is that takes into account the culture "in [4] ".…”

Influence of Culture on Investment Decisions: A Cross-Sectional Study of Ghanaian Population

“…Culture is a set of ideas that coordinate actions and construct the meanings of a group of people. Rafiee and Sarabdeen (2012) explained that cultural values are passed on from one generation to another such as from parents to their children, teachers to their students, peers to friends, leaders to followers, and institutions to members. People from different cultures differ in behaviors, social interactions, and communications.…”

“…There are several studies that show that cultural values have some influence on individual investment behaviors. Some of the studies used the theory of planned behavior in the context of individual investment decision making to indicate how social norms, cultural beliefs, subjective norms, and behavioral intentions affect investment behavior (East 1993;Rafiee and Sarabdeen, 2012;Sondari and Sudarsono, 2015).…”

Corporate governance and firm performance in an emerging market: Evidence from Barbados

“…The manner in which corporate governance is organized differs among countries based on their political, social and economic development. In developed countries, firms have dispersed shareholders whereas developing countries have firms with family owned businesses and concentrated shareholders (Rafiee & Sarabdeen, 2012).…”