To Be or Not To Be: The Existential Issue for National Governance Bundles

Abstract

Manuscript Type Conceptual Research Question/Issue The article addresses the issue of whether governance bundles which include both formal and informal governance mechanisms should be classified and compared on the basis of national identity. Research Findings/Insights The governance bundle affecting each firm has formal components which are frequently based on national legislation, but also includes social and moral dimensions, and behavior in words and action that may differ widely within nations and may derive from relationships with firms and communities in other countries or even globally; only the formal component of the governance bundle may be national. The development of governance bundles is a long‐term process that reflects the culture and ethical demands of the societies in which companies operate; formal institutions and laws develop and are respected – or not – in light of how informal governance mechanisms create the behavior in society. The continued existence of a mixture of familiar and different governance mechanisms in emerging markets is throwing doubt on the convergence hypothesis that development will lead all governance to a consistent model. Theoretical/Academic Implications The role of informal institutions – also as substitutes for corporate governance mechanisms – is central to understanding the functioning of corporate governance. Theory needs to consider the individual company and different company types (e.g., size, industry, ownership) in order to illuminate the interaction of formal corporate governance and informal institutions and other forces which constrain the company and those who control it. There needs to be more attention to the issue of sub‐national and supra‐national bundles together with “hybrid situations” where multinational corporations operate alongside local companies. Practitioner/Policy Implications The acceptability of corporate governance regimes depends on implementation at firm level; as there are substantial differences in the informal mechanisms amongst them, which may vary according to factors such as size, industry, ownership, organization or region, policy measures should have the flexibility and sophistication to take account of these.

How Does Regulation Affect the Relation Between Family Control and Reported Cash Flows? Comparative Evidence from India and the United States

“…These results extend the literature on convergence of national governance systems mentioned earlier (Markarian et al , ; Millar, ; Buchanan et al , ). The full‐sample results in Table combined with model 1 of Table (Panel C) clearly indicate that shifting was happening in both countries before regulation, and has increased after regulation.…”

“…These results extend the literature on convergence of national governance systems mentioned earlier (Markarian et al, 2007;Millar, 2014;Buchanan et al, 2014). The full-sample…”

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“…The first issue concerns the interplay between firm‐level and societal/cultural governance mechanisms including informal institutions such as norms and social networks (Schiehll et al, ). The second issue is focused on sub‐ and supranational governance bundles within national and regional governance structures (Millar, ).…”

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“…Fourth, the concept of “governance bundles” (e.g., Schiehll, Ahmadjian, & Filatotchev, ) as solutions to governance problems imply that empirical work on measurement of governance effectiveness must incorporate a combination of governance mechanisms, internal and external, rather than concentrate on any particular mechanism (Bosse, ; García‐Castro, Aguilera, & Ariño, ; Millar, ). In other words, the measurement of the effectiveness of any particular governance mechanism must take into account the juxtaposition of other complementary and substitute mechanisms without which one risks the problem of incomplete specifications and omitted variable bias in empirical analysis (cf.…”