2.1 Introduction:
Corporate Governance is an increasingly significant aspect of business and organizational management, extending to international politics and trade laws; and to globalized economics, corporations and organizations, and markets.

Theories, standards and regulations relating to Corporate Governance began to develop properly in the 1990s, so it is a relatively recent field of economic and management practice.

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From a simple and minimal point of view: Corporate Governance is a specialized mechanism for regulating risk in corporate activities, thereby (hopefully) averting corporate disasters, scandals, and consequential damage or losses to investors, staff, society and the wider world.

More broadly: Corporate Governance is a very sophisticated and flexible concept which addresses fundamental organizational purposes (for every type of organization – from a tiny corner-shop, to the largest multinational conglomerate) together with the most serious challenges arising from the globalization of corporate and organizational structures and the markets they serve.

Corporate Governance has also become an instrument for understanding, questioning, and refining some fundamental economic systems and philosophies, notably: capitalism, free market/market forces economics, business ethics, corporate leadership, the Psychological Contract, political economics, and globalization itself.

2.2 Collection of Review of Literature:
In order to more fully understand corporate governance in India and Abroad, a review of relevant literature is necessary. In view of that the below mentioned literature is collected through the web resources from 2001 to 2016.

2.3 Corporate Governance – Review of Literature from the years 2001 to 2016.

In the literature on corporate governance, large outside investors are generally observed to reduce agency costs of corporate governance by monitoring and disciplining managers. This paper separates large investors into foreign investors and government owned local financial institutions and argues that the later have higher degree of moral hazard. The empirical results of the paper, based on firm level panel data for 11 Indian industries, show that foreign investors contribute positively to corporate performance in terms of profitability while the government financial institutions contribute negatively. Reducing the role of government financial institutions and opening up of the equity markets to foreign investors under effective regulatory mechanisms should improve corporate governance in terms of increasing transparency in developing economies. This, in turn, contributes positively to economic growth. {Patibandla, Murali, 2001}
This study investigates whether a firm’s corporate governance practices have an effect on the quality of its publicly released financial information. In particular, we examine the relationship between audit committee and board of directors’ characteristics and the extent of corporate earnings management as measured by the level of positive and negative discretionary accruals. Using two groups of US firms, one with relatively high and one with relatively low levels of discretionary accruals in the year 1996, we find that earnings management is significantly associated with some of the governance practices by audit committees and boards of directors. For audit committees, income increasing earnings management is negatively associated with a larger proportion of outside members who are not managers in other firms, a clear mandate for overseeing both the financial statements and the external audit, and a committee composed only of independent directors that meet more than twice a year. We also find that short-term stocks options held by non-executive committee members are associated with income increasing earnings management. Income decreasing earnings management is negatively associated with the presence of at least a member with financial expertise and a clear mandate for overseeing both the financial statements and the external audit. For the board of directors, we find less income increasing earnings management in firms whose outside board members have experience as board members with the firm and with other firms. We also find that larger board, the importance of the ownership stakes in the firm held by non-executive directors, and experience as board members seems to reduce income decreasing earnings management. Our results provide evidence that effective boards and audit committees constrain earnings management activities. These findings have implications for regulators, such as the Securities and Exchange Commission (SEC), as they attempt to supervise firms whose financial reporting is in the gray area between legitimacy and outright fraud and where earnings statements reflect the desires of management rather than the underlying financial performance of the company, as pointed out by the Blue Ribbon Committee (1999). Sonda Marrakchi Chtourou,Jean Bédard,Lucie Courteau 2001
    We examine the role of the board of directors, the audit committee, and the executive committee in preventing earnings management. Supporting an SEC Panel Report’s conclusion that audit committee members need financial sophistication, we show that the composition of a board in general and of an audit committee more specifically, is related to the likelihood that a firm will engage in earnings management. Board and audit committee members with corporate or financial backgrounds are associated with firms that have smaller discretionary current accruals. Board and audit committee meeting frequency is also associated with reduced levels of discretionary current accruals. We conclude that board and audit committee activity and their members’ financial sophistication may be important factors in constraining the propensity of managers to engage in earnings management Biao Xie ,Wallace N. Davidson III,Peter J. DaDalt 2001
This paper reviews and proposes additional research concerning the role of publicly reported financial accounting information in the governance processes of corporations. We first review and analyze research on the use of financial accounting measures in managerial incentive plans and explore future research directions. We then propose that governance research be extended to explore more comprehensively the use of financial accounting information in additional corporate control mechanisms, and suggest opportunities for expanding such research in the U.S. and abroad, including the consideration of interactions among control mechanisms. We also propose research to investigate more directly the effects of financial accounting information on economic performance through its role in governance and more generally using a cross-country approach. Robert M. Bushman,Abbie J. Smith 2000,2001
Corporate governance is concerned with the resolution of collective action problems among dispersed investors and the reconciliation of conflicts of interest between various corporate claimholders. In this survey we review the theoretical and empirical research on the main mechanisms of corporate control, discuss the main legal and regulatory institutions in different countries, and examine the comparative corporate governance literature. A fundamental dilemma of corporate governance emerges from this overview: large shareholder intervention needs to be regulated to guarantee better small investor protection; but this may increase managerial discretion and scope for abuse. Alternative methods of limiting abuse have yet to be proven effective. Marco Becht,Patrick Bolton,Ailsa Röell ,2002.

We survey two generations of research on corporate governance systems around the world, concentrating on countries other than the United States. The first generation of international corporate governance research is patterned after the US reasearch that precedes it. These studies examine individual governance mechanisms – particularly board composition and equity ownership – in individual countries. The second generation of international corporate governance research recognizes the fundamental impact of differing legal sysems on the structure and effectiveness of corporate governance and compares systems across countries. Diane K. Denis ,John J. McConnell – 2003
Shareholder rights vary across firms. Using the incidence of 24 unique governance rules, we construct a “Governance Index” to proxy for the level of shareholder rights at about 1500 large firms during the 1990s. An investment strategy that bought firms in the lowest decile of the index (strongest rights) and sold firms in the highest decile of the index (weakest rights) would have earned abnormal returns of 8.5 percent per year during the sample period. We find that firms with stronger shareholder rights had higher firm value, higher profits, higher sales growth, lower capital expenditures, and made fewer corporate acquisitions. Paul A. Gompers, Joy L. Ishii, Andrew Metrick ,2003
The study argues that commercial banks pose unique corporate governance problems for managers and regulators, as well as for claimants on the banks’ cash flows, such as investors and depositors. The authors support the general principle that fiduciary duties should be owed exclusively to shareholders. However, in the special case of banks, they contend that the scope of the fiduciary duties and obligations of officers and directors should be broadened to include creditors. In particular, the authors call on bank directors to take solvency risk explicitly and systematically into account when making decisions or else face personal liability for failure to do so. Jonathan R. Macey,Maureen O’Hara 2003
Corporate governance (gongsi zhili) is a concept whose time seems definitely to have come in China. Chinese definitions of corporate governance in the abstract tend to cover the system regulating relationships among all parties with interests in a business organization, usually spelling out shareholders as a particularly important group. But Chinese corporate governance discourse in practice focuses almost exclusively on agency problems, and within only two types of firms: state-owned enterprises (SOEs), particularly after their transformation into one of the corporate forms provided for under the Company Law, and listed companies, which must be companies limited by shares (CLS) under the Company Law. This article discusses Chinese corporate governance in this narrow sense, and attempts to explain some perplexing features of its discourse, laws, and institutions (abbreviated hereinafter as “corporate governance laws and institutions” or CGLI). A fundamental dilemma of Chinese CGLI stems from the state policy of maintaining a full or controlling ownership interest in enterprises in several sectors. The state wants the enterprises it owns to be run efficiently, but not solely for the purpose of wealth maximization. A necessary element of state control of an enterprise is the use of that control for purposes such as the maintenance of urban employment levels, direct control over sensitive industries, or politically-motivated job placement. This in turn creates several problems. First, many of these goals are not easily measured and there is no obvious way of balancing them one against the other. This creates monitoring difficulties. Second, the policy of continued state involvement sets up a conflict of interest between the state as controlling shareholder and other shareholders. In using its control for purposes other than value maximization, the state exploits minority shareholders who have no other way to benefit from their investment. The major theme of this article is that the state wants to make SOEs operate more efficiently by subjecting them to a new and different set of rules – the rules of organization under the “modern enterprise system”. Policymakers then find, however, that they must change and adjust the rules to take account of continuing state ownership. Moreover, the need to provide for the special circumstances of state-sector enterprises ends up hijacking the entire Company Law, so that instead of state-sector enterprises being made more efficient by being forced to follow the rules for private-sector enterprises (the original ambition), potential private-sector enterprises are hamstrung by having to follow rules that make sense only in a heavily state-invested economy.

Donald C. Clarke 2003
In contrast to the much-studied role of capital markets in fostering convergence in corporate governance practices worldwide, we argue that the globalization of product and talent markets has affected corporate governance of firms in the Indian software industry. We model several possible reasons why a particular firm, Infosys, has emerged as the exemplar of good corporate governance in India, traditionally a backwater of corporate governance practices. We further analyze the manner in which Infosys has attempted to shape corporate governance practices in India more generally, and why these attempts have had limited effects thus far. Tarun Khanna, Krishna G Palepu – 2004
The struggle for efficient internal management control is the centre of the corporate governance debate in Europe since the incorporation of the Dutch Verenigde Oostindische Compagnie in 1602. Recent developments in Europe illustrate a trend towards specialised rules for listed companies and indicate growing convergence of internal control mechanisms independent of board structure. The revised Combined Code in the United Kingdom and also the French revised Principles of Corporate Governance, both of 2003, strengthen the presence of independent directors on one-tier boards in Europe. Another systemic break-through for the two-tier board model is the growing tendency to separate the positions of CEO and board chairman. For the German two-tier structure, the strengthening of the strategic role of the supervisory board (Aufsichtsrat) by the new German Corporate Governance Code of 2002 means an attempt to incorporate a key advantage of the one-tier model. Similarly, the control duties of the Italian internal auditing committee (collegio sindacale) were extended by the Testo Unico of 1998 and bring the Italian second board closer to the German supervisory board. The common trend to stricter standards of independence is challenged in Germany by its rigid concept of co-determination and, to a lesser extent, by the more flexible model of labour participation in France. Director’s duties and liabilities and also derivative actions are a focus of the reform debate in Germany since 1998 and are currently under review in the United Kingdom. After the Enron debacle the interplay between internal control devices and independent external auditing has become a major focus of interest in all countries considered. Driven by Anglo-Saxon codes of conduct audit committees today serve as a common denominator for good corporate governance. Though formal convergence is strong company organs in each country take on their own specific garment. Path dependent system development especially depends on shareholder structures and banking systems. The trend to greater structural flexibility on board level is strongly triggered by the introduction of a threefold board model choice under the French Loi Nouvelle Regulations Economique of 2001 and under the Italian Vietti-Reform that is in force since January 2004.

Klaus J. Hopt,Patrick C. Leyens ,2004.

     In this paper we analyze whether good corporate governance leads to higher common stock returns and enhances firm value in Europe. Throughout this study we use Deminor Corporate Governance Ratings for companies included in the FTSE Eurotop 300. Following the approach of Gompers, Ishii and Metrick (2003) we build portfolios consisting of well-governed and poorly governed companies and compare their performance. We also examine the impact of corporate governance on firm valuation. Our results show a positive relationship between these variables and corporate governance. This relationship weakens substantially after adjusting for country differences. Finally, we analyze the relationship between corporate governance and firm performance, as approximated by Net-Profit-Margin (NPM) and Return-on-Equity (ROE). Surprisingly, and contrary to Gompers, Ishii and Metrick (2003), we find a negative relationship between governance standards and these earnings based performance ratios for which we discuss possible implications. Rob Bauer, Nadja Guenster ,Rogér Otten 2003, 2004
Good corporate governance ensures that corporations perform better and have a better relationship with its stakeholders. The proper practice of accounting standards is very significant, as it leads to the effective disclosure and consequently good corporate governance programmes. Hence, the practice of proper accounting standards is more relevant issue for good corporate governance in the present competitive era as the standards provide a useful mechanism to restructure the core corporate values. In this context, the paper attempts to discuss the practice of accounting standards for good corporate governance, as it is regarded as one of the important relevant issues of corporate governance, with an objective to make accounting standards useful to ensure the better disclosure, thus the good corporate governance. The empirical results revealed that the most of the select companies perceived the relevance of standards for good corporate governance and complied with twenty to twenty five accounting standards with varied treatments of items, which jeopardized the comparability and left the scope for personal discretion and confusion. The necessity of stringent and uniform standards, wide participation, and harmonization of related laws is realized for ensuring the true and fair view of business, thus good corporate governance. Shafi Mohamad ,K. Shankaraiah 2004
The paper assembles data on over 1,000 manufacturing and services firms in India for the entire post-reform period from 1992 through 2002 to examine the association between corporate governance and monetary policy. The findings suggests that (a) public firms are relatively more responsive to a monetary contraction vis-à-vis their private counterparts; and, (b) quoted firms lower their long-term bank borrowings in favour of short-term borrowings, post monetary tightening, as compared with unquoted firms. A disaggregated analysis based on firm size and leverage above a certain threshold validates these findings. The study concludes by analyzing the broad policy implications of these findings. Ghosh, Saibal and Sensarma, Rudra 2004
We examine the relation between board structure (size and composition) and firm performance using a sample of banking firms during 1959-1999. Contrary to the evidence for non-financial firms, we find that banking firms with larger boards do not underperform their peers in terms of Tobin’s Q. We argue that M&A activity and features of the bank holding company organizational form may make a larger board more desirable for these firms and document that board size is significantly related to characteristics of our sample firms’ structures. Even after accounting for these potential sources of endogeneity, we do not find a negative relationship between board size and Tobin’s Q. Our findings suggest that constraints on board size in the banking industry may be counter-productiveRenee B. Adams,Hamid Mehran 2005
While recent high-profile corporate governance failures in developed countries have brought the subject to media attention, the issue has always been central to finance and economics. The issue is particularly important for developing countries since it is central to financial and economic development. Recent research has established that financial development is largely dependent on investor protection in a country – de jure and de facto. With the legacy of the English legal system, India has one of the best corporate governance laws but poor implementation together with socialistic policies of the prereform era has affected corporate governance. Concentrated ownership of shares, pyramiding and tunneling of funds among group companies mark the Indian corporate landscape. Boards of directors have frequently been silent spectators with the DFI nominee directors unable or unwilling to carry out their monitoring functions. Since liberalization, however, serious efforts have been directed at overhauling the system with the SEBI instituting the Clause 49 of the Listing Agreements dealing with corporate governance. Corporate governance of Indian banks is also undergoing a process of change with a move towards more market-based governance. Rajesh Chakrabarti 2005.

This paper provides evidence on how executive compensation relates to firm performance in listed firms in China. Using comprehensive financial and accounting data on China’s listed firms from 1998 to 2002, augmented by unique data on executive compensation, ownership structure and board characteristics, we find for the first time statistically significant sensitivities and elasticities of annual cash compensation (salary and bonus) for top executives with respect to shareholder value in China. In addition, sales growth is shown to be significantly linked to executive compensation and that Chinese executives are penalized for making negative profit although they are neither penalized for declining profit nor rewarded for rising profit insofar as it is positive. Perhaps more importantly, we find that ownership structure of China’s listed firms has important effects on pay-performance link in these firms: (i) state ownership of China’s listed firms is weakening pay-performance link for top managers and thus possibly making China’s listed firms less effective in solving the agency problem; (ii) such effects exist for both direct government ownership through state shares and indirect government ownership through legal person shares and indirect ownership of listed firms by the state may weaken pay-performance link more than direct state ownership; and (iii) corporate governance reform measures such as the promotion of independent directorship and the separation of the CEO position from the board chairmanship are ineffective in making pay-performance link stronger. As such, ownership restructuring may be needed for China to successfully transform its SOEs to efficient modernized corporations and reform its overall economy. Takao Kato ,Cheryl X. Long 2005.

China’s WTO entry in 2001 accelerated its integration with the world economy and exposed Chinese companies to international competition. As globalization gains momentum, national corporate governance systems come under greater scrutiny. This article discusses three generic corporate governance models and the 2004 OECD Corporate Governance Principles and their possible application to China. To investigate the possibility of China’s convergence or divergence from international corporate governance models and principles, it delves into the evolution of governance of Chinese listed companies that are transformed from State-Owned Enterprises (SOEs) and examines current major corporate governance issues in listed companies. The correlation of the historical development of governance of SOEs and persistent governance issues reveals that the governance of SOEs and listed companies bears the mark of China’s political economy, defining their path dependency. The article argues that China needs to develop a corporate governance regime that best suits Chinese companies even if this is partially divergent from international corporate governance best practices. Chenxia Shi 2005.

In this paper we develop an integrated approach towards corporate governance and business ethics. Our central argument is that organisations can learn from the development of strategic planning in the 1970s and 1980s. We identify three weaknesses – a bureaucratic and formalised approach, lack of implementation and lack of integration throughout the organisation – which were prevalent in strategic planning in the past and which are potentially just as problematic for an integrated corporate governance approach to business ethics. We suggest ways these weaknesses might be avoided and provide questions for boards of directors to consider when integrating ethical concerns into their organisations’ corporate governance structures. Ingrid Bonn,Josie Fisher 2005
Under what conditions do stakeholders consent to a regime of corporate governance? We propose that consent by the governed in corporate governance cannot be satisfactorily explained without reference to the collective value of procedural fairness that underlies markets. Drawing on the social psychology of justice and the political economy of social choice, we highlight the critical role played by democratic procedures in achieving consent by the governed in modern society. This line of reasoning leads us to suggest that the evolution of corporate governance, too, can be understood in terms of Tocqueville well-known hypothesis that democracy eventually prevails in all spheres of organised activity. Examining the historical record of institutional reform in France, Germany, the United Kingdom and the United  States,  we  find  that  corporate  governance  has  indeed  evolved  to  make  increasing  use of democratic procedures. Viewed over the long-term of two centuries of capitalist development, corporate governance is seen to have successively incorporated enfranchisement, separation of powers and representation. In conclusion, we consider the implications of basing the study of corporate governance on the question of stakeholder consent and the practice of corporate governance on the procedures of democracy. Pierre-Yves Gomez,Harry Korine 2005
This paper analyses recent corporate governance codes issued by 20 countries for evidence of convergence in corporate governance systems in Europe. The analysis shows that there has been a degree of convergence towards an Anglo-Saxon model of corporate governance as the audit committee concept is widely accepted in countries with both unitary and two-tier governance systems. Further, the latest audit committee recommendations in countries that have issued several governance codes show a strengthening of the recommendations for an audit committee over time in line with the Anglo-Saxon audit committee concept and convergence with the debate in the US and UK on issues such as the independence and financial expertise of members. However, consistent with the literature on the convergence of European corporate governance systems, at an operational level there is limited consistency in the recommended structure and role of audit committees. Paul Collier,Mahbub Zaman 2005.

We analyse the relationship between firm value, as measured by Tobin’s q, and newly released indices of effective corporate governance for a sample of 263 Canadian firms. The results indicate that corporate governance does matter in Canada. However, not all elements of measured governance are important, and the effects of governance do differ by ownership category. For the entire sample of firms we find no evidence that a total governance index affects firm performance. This is mainly because we find no evidence that board independence, the most heavily-weighted sub-index, has any positive effect on firm performance. Indeed, for family-owned firms we find that the effect is negative. In general, sub-indices measuring effective compensation, disclosure and shareholder rights practices enhance performance and this is true for most ownership types. We also find no evidence that governance practices are endogenous. Peter Klein Daniel Shapiro,Jeffrey Young 2005
Agency theorists have put forth a number of internal control mechanisms that can reduce agency problems. These different mechanisms are substitutive and thus it is thought that both the board of directors and large external shareholders can influence CEO compensation. Stewardship theory challenges the presumption of self-interest of agency theory, holding that managers view themselves as stewards of their organisation. The first objective of this paper is to study the influence of the control of the board of directors and large external shareholders on CEO compensation. The second objective is to utilise both stewardship and agency theory to analyse the relationship between control mechanisms and compensation, and to see which theory is more applicable. This paper uses the LISREL model to study the influence that the control of the board of directors and external large shareholders has upon CEO compensation, with data drawn from samples of listed manufacturing companies between the years 1997 and 1999 in Taiwan. The following conclusions are reached: (1) the paper supports the viewpoint of stewardship theory whereby the CEO acts as a steward of his/her company when he/she also holds the position of chairman of the company. (2) The findings show that CEO compensation will be high when the board’s control is relatively ineffective. (3) The shareholdings of the board of directors can reinforce the degree of control from the board. Ying-Fen Lin 2005
This paper presents a new, holistic approach to corporate governance, adding simultaneous value to shareholders, customers, employees and society. This new approach to directing and controlling companies integrates components of corporate governance that have historically been treated in isolation of each other in research, teaching and practice. Martin Hilb 2005
Corporate governance systems develop as a result of cultural underpinnings, legal structures and different forms of financing business. This paper describes these factors in the US and UK, two examples of strong shareholder ownership patterns of financing, and Germany, a country with a tradition of strong creditor financing. Recommendations are made for best practices in governance. Although enhanced governance mechanisms is a sound goal to pursue, the results may be meaningless unless internal controls are strengthened and top management and the board of directors establish an ethical tone at the top. Steven M. Mintz 2005
Corporate governance frameworks can be perceived as institutional attempts to create a structured dialogue between companies and their shareholders and stakeholders with the purpose of paving the way for understanding the company’s strategic and operational goals, including critical success factors for achieving those goals. This article focuses on the disclosure on corporate governance in Danish companies (SMEs). It also provides evidence from the literature as well as analyses of company annual reports. Furthermore, the findings open the way for a discussion on further research on corporate governance and disclosure on strategic management and transparency. Eva Parum 2005
In a companion paper, Bernard Black, Hasung Jang ; Woochan Kim, Predicting Firms’ Corporate Governance Choices: Evidence from Korea, 12 Journal of Corporate Finance 660-691 (2006), nearly final version at, we examine the factors which predict firms’ governance choices.For our related, subsequent work with panel data on Korean governance, see:Bernard Black and Woochan Kim, The Effect of Board Structure on Firm Value: A Multiple Identification Strategy Approach Using Korean Data (working paper 2008), .Bernard Black, Woochan Kim, Hasung Jang and Kyung-Suh Park, How Corporate Governance Affects Firm Value: Evidence on Channels from Korea (working paper 2008), (studying the channels through which governance may affect firm market value). Woochan Kim ,Bernard S. Black, Hasung Jang 2006,2005.

   A prime objective of the Sarbanes-Oxley Act and recent changes to stock exchange listing standards is to improve the quality of financial reporting. We examine the associations between audit committee financial expertise and alternate corporate governance mechanisms and earnings management. We find that both accounting and certain types of non-accounting financial expertise reduce earnings management for firms with weak alternate corporate governance mechanisms, but that independent audit committee members with financial expertise are most effective in mitigating earnings management. Importantly we find that alternate corporate governance mechanisms are an effective substitute for audit committee financial expertise in constraining earnings management. Finally, we find either no association or a positive association between financial expertise and real earnings management. Our results suggest that alternate governance approaches are equally effective in improving the quality of financial reporting, and that firms should have the flexibility to design the particular set of governance mechanisms that best fit their unique situations. Joseph V. Carcello,Carl W. Hollingsworth ,April Klein,Terry L. Neal,2006This study investigates the impact of overall level as well as of separate elements of corporate governance on enterprise performance for open joint-stock companies (OJSC) in transitional country, Ukraine. We use unique data on corporate governance choices for above 5 thousand firms (about a universe of OJSCs in Ukraine) for three years from 2000 to 2002. We construct overall index of corporate governance (UCGI) and sub-indices of corporate governance describing such aspects of corporate governance as shareholder rights, transparency/information disclosure, board independence and chairman independence. We use two different sets of instrumental variables to deal with econometrics problems. First, we use regional variations in social trust factors to instrument for corporate governance choices in cross-sectional framework. Our instruments include political diversity, religion (number of Christian churches) and ethnic diversity across 24 regions in Ukraine. We thoroughly discuss the plausibility of our instruments in a separate section. The hypothesis that our instruments are weak is rejected based on critical values of Stock-Yogo test and thus we use two-stage least squares (2SLS) estimator, and two-stage generalized method of moments (2SGMM) estimator to account for arbitrary heteroskedasticity. Additionally we use time-invariant variables plus time-varying religion variable as instruments after first-differencing transformation. Since in this case we are not able to reject the hypothesis that our instruments are weak we employ also limited-information maximum likelihood estimator (LIML) and testing procedures that are robust to the presence of weak instruments. We find strong evidence that corporate governance predicts firm performance in the transition context. We could not reject the null that UCGI is exogenous in various cross-sectional specifications but we document presence of endogeneity when first differencing estimator employed. Our results predict that one-point-increase in our UCGI index would result in around 0.4-1.9% increase in performance; and based on HOLS results worst to best change in UCGI predicts about 40% increase in company’s performance. Additionally we document nonlinear effect of corporate governance suggesting that companies with lower then average level of governance incur losses from an incremental improvement in their governance while those with the three major U.S. stock exchanges are not more closely linked to firm operating performance than are those not so mandated. Lawrence D. Brown ,Marcus L. Caylor 2006higher then average level of governance enjoy excessive improvement from that in their performance. We document statistically and economically strong effects of shareholder rights, transparency and board independence on performance. We also find a negative effect of the independence of the board chairman on performance. Vitaliy Zheka 2006
  Using a unique dataset provided by Institutional Shareholder Services (ISS), we relate 51 governance provisions to firm operating performance as proxied by return on assets and return on equity. We show that seven (six) governance provisions are significantly and positively related to return on assets (equity) using at least two of three econometric approaches. We identify 10 corporate governance provisions that are positively linked to return on assets, return on equity or both using at least two of our three econometric approaches. Nine of the corporate governance provisions we examine have recently been mandated by the three major U.S. stock exchanges but only one of them, nominating committee is comprised solely of independent outside directors, is significantly and positively related to firm operating performance. Our results reveal that the corporate governance reforms recently mandated by
Corporate governance (gongsi zhili) is a concept whose time has come in China, and the institution of the independent director is a major part of this concept. Policymakers in several countries such as the United Kingdom and Japan have turned to independent directors as an important element of legal and policy reform in the field of corporate governance. In August 2001, the China Securities Regulatory Commission (CSRC) issued its Guidance Opinion on the Establishment of an Independent Director System in Listed Companies. Covering all companies listed on Chinese stock exchanges (but not Chinese companies listed overseas), it constitutes the most comprehensive measure taken to date by the CSRC – or indeed by any Chinese governmental authority – to regulate internal corporate governance through the institution of the independent director. This article discusses the institution of independent directors, and the Independent Director Opinion specifically, as a potential solution to Chinese corporate governance problems. It begins by discussing special features of the Chinese corporate landscape and the most prominent problems in the area of corporate governance. It then proceeds to identify differing conceptions of what is broadly termed the independent director – the outside director, the disinterested director, and the (more narrowly defined) independent director – and discusses the approaches taken in several different jurisdictions. The article canvasses empirical research on the relationship between independent directors and corporate performance in the United States, as well as in China, and finds that the research yields similar conclusions: there is no strong link. The article concludes by arguing that proponents of the institution of independent directors misconceive the nature of the corporate governance problem in China, as well as the functioning of independent directors in the United States, and have not taken into account specific features of the Chinese institutional environment – particularly the legal environment – that affect the viability of any proposed solution. Donald C. Clarke 2006
The aim of this paper is to discuss and analyse whether recommendations on corporate governance have led to more transparency and well-defined corporate identities for listed small and medium-sized companies through their external communication on corporate governance. The paper focuses on the task and responsibility of the board and discusses the effect of external communication on management, transparency and corporate identity. The paper also analyses results from two empirical studies on communication on corporate governance from 60 Danish listed companies. It can be concluded that communication through corporate governance has led to more transparency in how companies are managed. There is room for improvement, however, before external communication leads to well-defined company identities. Eva Parum 2006
While the corporate governance literature generally focuses on the parent legal entity, many organisations are now multinational enterprises (MNEs) with subsidiaries that are most often legal entities in their host countries. Despite the strengthening of corporate governance regimes internationally, the boards of these subsidiaries are in many instances perfunctory. This paper examines the question of whether developments in corporate governance theory and practice can add value for the local subsidiaries of MNEs Geoffrey C. Kiel,Kevin Hendry,Gavin J. Nicholson 2006
Governance of public corporations in the United States has operated under the agency model with regulatory strengthening since the passage of Sarbanes-Oxley legislation. With this foundation in place, boards are empowered to utilise their power and influence and can effectively monitor the actions of management, intervening where necessary. In effect, the rules of engagement embodied in the structure and the law guide interactions and empowerment. The governance model of the mutual funds industry, representing over 8 trillion dollars, is often viewed as a mirror of the corporate world, but upon closer analysis is found to have significant structural differences that dilute the authority of directors. The two models are compared and analysed with recommendations made to strengthen the oversight of mutual funds. Robert F. Radin,William B. Stevenson,2006
Since 2002 company law requires listed German corporations to declare their degree of conformity to the German Corporate Governance Code (GCGC). We examine whether there is a pricing effect connected to the declared degree of compliance for a sample of (big) publicly traded German companies listed in the DAX 30 and MDAX. We find that the degree of compliance with the Code is value-relevant after controlling for an endogeneity bias. This shows that the capital markets find the rules in the code meaningful and that there is capital market pressure to adopt the Code regulation. Our findings also suggest that the capital market fills a possible “control vacuum” resulting from the withdrawal of commercial banks from their (former) influential role in the German “insider control” corporate governance model. Igor Goncharov,Joerg Richard Werner,Jochen Zimmermann 2006
There have been a number of changes in United Kingdom corporate governance regulation since the financial scandals of the late 1980s and early 1990s. These developments, commencing with the publication of the Cadbury Report in 1992, address “the frequency, clarity and form in which information should be provided” (Cadbury Report, 1992, p. 60). This paper examines the increased flow of corporate news announcements by UK listed companies following the introduction of corporate governance codes. Our results indicate that the introduction of the Cadbury, Greenbury and Hampel reports was accompanied by a significant increase in the number of news announcements. Lynsey Sheridan,Edward Jones,Claire Marston 2006
The recent onslaught of corporate scandals has compelled the world to acknowledge the profound impact of corporate governance practices on the global economy. Corporate governance is of particular concern in developing economies, where the infusion of international investor capital and foreign aid is essential to economic stability and growth. This paper focuses attention on corporate governance initiatives in South Africa, given its significance as an emerging market, its potential leadership role on the African continent and the country’s notable corporate governance reform since the collapse of apartheid in 1994. The evolution of the country’s corporate structure and the forces driving corporate governance reform over the past decade will be examined, followed by a review of the most notable reform initiatives in place today. Finally, an assessment of those initiatives will be presented, along with recommendations concerning how South Africa’s initiatives can serve as models of enhanced corporate governance standards for the African continent. Melinda Vaughn,Lori Verstegen Ryan 2006
Almost all firms start out as small, owner-managed companies. Many stay that way throughout their lives. Some create attractive investment opportunities, however, that will allow them to grow rapidly and become leading companies in their country. These firms typically do not have sufficient internal funds flows and must turn to external sources of finance. Among these is the issuance of equity. Once a firm sells shares, however, the cost of the managers engaging in on-the-job consumption falls, and they can be expected to do so at the expense of their shareholders. Knowing this, potential shareholders may be unwilling to purchase a new offering of a young firm’s shares, and the firm with attractive investment opportunities is unable to finance them. Strong corporate governance institutions help to protect shareholders from the discretionary use of their firm’s resources. This paper reviews the case for having strong corporate governance institutions to facilitate the creation of thick equity markets in the context of developing countries in emerging markets, and examines the case for relying on alternative sources of capital including the state. Dennis C. Mueller 2006.

This paper considers the Greenspan/Summers/IMF (GSI) argument that the Asian way of doing business was the deep cause of the Asian crisis. The IMF reform programme for the crisis-affected Asian countries suggested they should abandon the Asian business model and adopt the US corporate model. The main findings are: (a) contrary to GSI doctrine, poor corporate governance and lack of competition are not common characteristics of the Asian business model; (b) the stock market-based US business model has severe limitations for developing country corporations, not least because of imperfect share prices and the imperfect market for corporate control. Ajit Singh,Ann Zammit 2006
Recent work on corporate governance has highlighted the effects of corporate governance quality on macroeconomic crises, especially in the context of South-East Asian economies. However, the possibility of reverse causation from macroeconomic performance to corporate governance has been overlooked. This paper aims to address this issue by examining the relationship between macroeconomic stabilisation and corporate governance reforms in Turkey since the 1999 and 2001 crises. We demonstrate that the prospect of macroeconomic stability has led to extensive corporate governance reforms for two reasons. First, recent return to macroeconomic stability has been underpinned by public governance reforms, which spilled over to the area of corporate governance. We call this the statutory reform effect. Second, macroeconomic stability tended to have a positive effect on firms’ investment in corporate governance quality. We call this the voluntary reform effect. To substantiate these findings, we examine the post-1999 developments in the following areas: (i) the effectiveness of regulatory authorities; (ii) disclosure and transparency rules; and (iii) the quality of the enforcement regime. Mehmet Ugur,Melsa Ararat 2006
In spite of the fact that most research has concentrated on the typical agency problem between managers and dispersed shareholders, in many countries large shareholders are much more frequently observed than firms with dispersed ownership structures. While large shareholders are perceived as a potential solution to the typical agency problem between managers and dispersed shareholders, less research has been done on the costs of large shareholders. One important issue in this literature is that deviations of cash flow rights from voting rights often result in substantial value discounts. In this paper we test for the impact of such deviations on corporate investment performance in Turkey. To measure corporate investment performance we estimate returns on investment relative to company costs of capital, a methodology that overcomes the endogeneity problem, which is known to contaminate results in the empirical corporate governance literature. Consistent with existing studies, we find that the average Turkish listed company has a return on investment which is less than its cost of capital. We also report significantly better investment performance for companies that do not deviate from one share-one vote by using pyramidal ownership structures, dual-class shares and other devices that enhance the control power of large shareholders beyond their cash flow rights. We also find that
businessgroup membership improves the investment performance and relative market valuation of companies. Hakan Orbay,B. Burcin Yurtoglu 2006
This paper argues that key differences between the UK and the US in the importance ascribed to a company’s social responsibilities (CSR) reflect differences in the corporate governance arrangements in these two countries. Specifically, we analyse the role of a salient type of owner in the UK and the US, institutional investors, in emphasising firm-level CSR actions. We explore differences between institutional investors in the UK and the US concerning CSR, and draw on a model of instrumental, relational and moral motives to explore why institutional investors in the UK are becoming concerned with firms’ social and environmental actions. We conclude with some suggestions for future research in this area. Ruth V. Aguilera,Cynthia A. Williams,John M. Conley,Deborah E. Rupp 2006.

This paper discusses the findings of a study undertaken by a team from the University of Birmingham’s Institute for Local Government Studies (INLOGOV), funded by the Economic and Social Research Council. The research explores the implications for democratic practice of collaborative working through partnership arrangements in the public sector. Through a study of multi-organisational partnerships in two local authority areas, the research identifies a problem for policy makers to address: partnerships are flexible management tools, but exhibit a democratic deficit in terms of the rules and procedures of public governance when measured against a benchmark of elected local government. Partnerships are in, but not of, the community. Mike Smith,Navdeep Mathur ,Chris Skelcher 2006
The paper investigates the Financial Services Authority’s (FSA) reforms of the unique corporate governance arrangements of UK life insurers. In particular, the paper explores the need for special arrangements for the governance of with-profits funds, the role of actuaries in corporate governance and the proposals for reform which resulted from the FSA’s With Profits Review and Lord Penrose’s Report into the problems experienced at the Equitable Life Assurance Company. The paper concludes that post-Cadbury trends in corporate governance, in combination with the FSA’s reforms, have placed boards at the centre stage of actuarial governance with directors no longer able to abrogate responsibility for actuarial decisions. There is also much to be learnt from studying changes to the actuarial and corporate governance of life insurers as it reveals the complex nature of corporate reality, and demonstrates the inadequacy of theoretical approaches that dichotomise corporate governance between Anglo-Saxon shareholder and continental European stakeholder models. Ian P. Dewing,Peter O. Russell 2006
When the Cyprus economy was booming in the 1990s, key issues emanating from sound corporate governance, such as accountability, transparency and effective independent boards were not deemed important. However, largely as a result of the Cyprus stock exchange collapse of 2000, this view changed. In September 2002, due to the collapse, the Cyprus Stock Exchange implemented a Corporate Governance Code predicated largely on Anglo-Saxon principles of corporate governance. Maria Krambia-Kapardis,Jim Psaros 2006
American boards of directors increasingly treat their delegation of authority to management as a careful and self-conscious decision. Numerically dominated by non-executives, boards recognize that they cannot run the company, and many are now seeking to provide stronger oversight of the company without crossing the line into management. Based on interviews with informants at 31 major companies, we find that annual calendars and written protocols are often used to allocate decision rights between the board and management. Written protocols vary widely, ranging from detailed and comprehensive to skeletal and limited in scope. While useful, such calendars and protocols do not negate the need for executives to make frequent judgement calls on what issues should go to the board and what should remain within management. Executives still set much of the board’s decision-making agenda, and despite increasingly asserting their sovereignty in recent years, directors remain substantially dependent upon the executives’ judgement on what should come to the board. At the same time, a norm is emerging among directors and executives that the latter must be mindful of what directors want to hear and believe they should decide. Michael Useem,Andy Zelleke 2006
Corporate Governance (CG) has emerged as one of the key elements of public policy reforms individuals. It is however not a foolproof concept as it relies heavily on data available from insiders. There are certain indispensable principles envisaged in the concept. These mainly include (a) Discipline in operations (b) Transparency in dealings and disclosures (c) Accountability to shareholders (d) Responsibility of company’s action as well as (e) Social Responsibility. It is expected that Corporate Governance aim to ensure that investors should get an appropriate return on their money. There are different perspectives applied in rating Corporate Governance. Leading global agencies, standard and poor, and moody has adopted “Financial Perspective” to rate Corporate Governance. They mainly stick to the interests of “Financial stakeholders”. This particular term includes both shareholders and creditors. In this paper it has been discussed the entire task of Corporate Governance, how is having a mechanism where in some inbuilt problems are found. Thus Corporate Governance (CG) is the way the firm ought to be run, managed and controlled. Basic standards of Corporate Governance structure and processes have also been slowly evolving over last two decades. Pithadia Vijay2007
We argue that ethical leadership must be in line with corporate governance in general and of the Chief Executive Officer (CEO) who must be the starting point for the rest of the organisational members to have an ethical guideline to follow. Nevertheless, we argue that the figure of the Ethics Officer (EO) is the connecting link between ethical values of Corporate Governance, CEOs and those of the other staff. With this idea in mind, we present the characteristics an EO must have, and reach the conclusion that organisational ethical values cannot be imposed. Instead, they must be managed through a corporate governance ethical culture, so this term will be the focus of the paper. Juan Llopis1, M Reyes Gonzalez2 and Jose L Gasco32007
The purpose of the article is to outline some key characteristics of the Swedish corporate governance system and to highlight some of its important historical roots. The ambition is also to relate and compare Sweden in that respect to some other countries. Hopefully, this article will also help the international corporate governance community to better understand some of the Swedish particulars. Rolf H. Carlsson2007
The voice-exit paradigm continues to serve as the framework for debating key issues in UK corporate governance. That paradigm, however, has become an anachronism with the recent changes in the scale and organisational structure of the UK asset management industry. As a result of these changes the “holding” and the “selling” of shares tend to be mutually inclusive rather than exclusive acts, and the capital market’s corporate governance role is now exercised more through the gravitational pull of equity trading than through the medium of hostile takeovers. If the new realities are to be correctly appraised and factored into the corporate governance codes of conduct, the voice-exit paradigm has to be abandoned in favour of an alternative framework that is attuned to these realities. The aim
of this paper is to help develop such a framework. Photis Lysandrou,Denitsa Stoyanova 2007
This article examines the overall acceptance of the best practice provisions contained in the Dutch corporate governance code and identifies those that receive comparably less agreement among 150 Dutch listed companies in 2004. The findings indicate a high level of compliance with the Code. Moreover, the extent of compliance is positively associated with company size. Provisions related to the remuneration of board members, independence of supervisory board members, and requirements with respect to internal control systems stand out when it comes to non-compliance. In addition, the nature and content of the explanations provided for non-compliance are remarkably similar across companies, which may indicate symbolic compliance with the Code’s best practice provisions. Dirk Akkermans,Hans van Ees,Niels Hermes,Reggy Hooghiemstra,Gerwin Van der Laan,Theo Arjen van Witteloostuijn,2007
Some S&P 500 firms have recently formed technology committees at the board-level. This study investigates the corporate governance and firm financial performance implications of the voluntary formation of technology committees by members of the S&P 500. Using financial performance and structure-related variables, the results of the study suggest that firms’ corporate governance ratings are significantly and positively related to their decisions to voluntarily form technology committees. Specifically, firm performance ratios such as return on assets, return on equity, and net profit margin appear to be associated with firms’ decisions to form board-level technology committees. These findings have post Sarbanes-Oxley corporate governance and performance implications and should be relevant for stakeholders such as the SEC, various stock exchanges, and the firms themselves. Ronald F. Premuroso,Somnath Bhattacharya Raton, Florida,2007.

This paper explores the role of the annual general meeting (AGM) in the mediation of tensions between the board of directors of a company and its shareholders. An evaluative framework is developed for assessing whether directors at any particular AGM appear to be making the meeting inclusive for the shareholders. Consideration is made at first of the place of the AGM as a corporate governance device, concluding that in recent times shareholder voting on resolutions and questioning of the board exhibit important features of self-governance as opposed to external regulation. A scoring system is then developed for assessing whether an AGM favours the company or the shareholders, using twelve criteria to rank them. The results of observations of 22 AGMs over recent years in five industrial sectors are then analysed and assessed, with reasons for high and low scores being suggested. Nicholas Apostolides,2007.

The dichotomous worlds hypothesis holds that corporate governance systems worldwide are either based on the Anglo-American shareholder model or the Eurasian stakeholder model. We suggest a more fine-grained classification, based on five corporate governance logics – socially constructed, historical patterns of material practices, assumptions, values, beliefs, and rules by which all parties involved in economic productive activities structure their material interdependencies and provide meaning to the social reality of corporate life. These logics are discovered through a content analysis of the corporate governance reform codes of 38 countries. Pursey P. M. A. R. Heugens,J. A. (Jordan) Otten ,2007
This paper analyses international location decisions of corporations based on corporate governance considerations. Using firm level data on 540 Multinational Enterprises (MNEs) with 44,149 subsidiaries in 188 countries, we test whether firms with relatively good governance standards are more often located in countries with a weak governance system. We find empirical support for this hypothesis, especially for those corporations present in low-income countries. Lammertjan Dam,Bert ScholtensElmer Sterken,2007.
Recent high-profile corporate failures in the US and elsewhere in the world, many of which were caused by, or at least exacerbated by, weak governance practices, have convinced an increasing number of once sceptical investors that governance is a separate risk class that certainly requires attention and, in many cases, expert analysis. In this paper we examine corporate governance in Tunisia, North Africa, by analysing the board, the ownership structures and the financial market. By using a panel data set of 24 firms listed on the Tunisian Stock Exchange for the period 2000 to 2005, we provide evidence that governance in Tunisian firms is characterised by strong blockholders (often including families). Moreover, firms can choose between a dual board and a monist board. Our estimates show that Tunisian governance is weak. Finally we provide evidence for a strong relationship between governance and corporate performance. Imen Khanchel El Mehdi 2007.

This paper investigates empirically the effect of board ownership on firm performance in Bangladesh. By estimating single equation and simultaneous equation models on an unbalanced pooled sample of listed firms, it offers some new insight into the ownership-performance link in Bangladesh. Building on extant literature, it examines the ownership-performance relationship in an emerging market economy considering ownership as exogenous and as endogenous. The latter approach is favoured as recent empirical evidence shows that ownership and performance are endogenously determined and there is either a reverse-way or two-way causality relationship between the two. While OLS regression analysis indicates a linear and non-linear relationship between board ownership and performance, this disappears when 2-SLS estimation of a simultaneous equation model is carried out. Instead, a reverse causality relationship emerges. Other governance and control variables appear to have effects consistent with the literature. These results suggest a need to strengthen the internal control mechanisms within listed firms in Bangladesh. Omar Al Farooque,Tony van Zijl,Keitha Dunstan,AKM Waresul Karim 2007
This paper focuses on the corporate governance reforms in Malaysia since the 1997/1998 Asian financial crisis. Drawing upon ten in-depth semi-structured interviews conducted with leading players who were highly involved in Malaysia’s corporate governance development, together with a review of the literature in this area, the paper offers evidence on the meaning of corporate governance in the Malaysian context, the factors behind the recent reforms and views on the appropriate corporate governance system for Malaysia. While it is shown that Malaysia’s corporate governance reforms has modelled on the Anglo-American systems to a large extent, the majority of the interviewees placed greater emphasis on the social aspect of corporate governance in contrast to the traditional notion of shareholder accountability. The main concern raised in the paper is that without changes in the previous problematic corporate culture, the intended purpose of the recent corporate governance reforms will unlikely to be achieved. Pik Kun Liew 2007
To evaluate the Chinese government’s recent market-orientated efforts to promote good corporate governance, this paper conducts a re-examination of the working mechanics for market competition and other market-based governance mechanisms to ensure good corporate governance. The finding is that the utility of market mechanisms may have been exaggerated. Not only are they not effective in disciplining serious managerial misbehaviour that offers managers more gain than loss, even their limited value to discourage such misbehaviour as managerial shirking is conditioned on that the opportunities for illegitimate enrichment by managers are few. On the contrary, legal sanction is fundamental to good corporate governance, because it is the only feasible way to combat such serious misbehaviour and curb illegitimate enrichment. Current experience of corporate governance in China conforms to this finding and poor corporate governance in China is better explained by the lack of credible legal deterrence. This being the case, the top priority for China is to strengthen legal sanction in order to rein in the excessive misappropriation and flagrant fraud. Only once this has been done will the efforts to implement market-orientated reforms bear any significant fruits. Zhong Zhang 2007
This study analyses the relationship between ownership structure and board of director composition and their influences on the total factor productivity (TFP) of Taiwan’s firms. The empirical results show that the curvilinear specification is better to capture the relationship between inside ownership and firm productivity. Meanwhile, the ownership structure in a firm indeed affects differences in TFP between conglomerate firms and non-conglomerate firms, high-tech firms and non-high-tech firms, and family-owned firms and non-family-owned firms. Additionally, a smaller board may be less encumbered by bureaucratic problems and more functional and CEO duality may be able to improve productivity. Furthermore, productivity deteriorates with increasing proportion of collateralised shares. More institutional holdings, however, are an effective way to alleviate the negative impact of collateralised shares on TFP. Min-Hsien Chiang, Jia-Hui Lin 2007
   This article provides an overview of research we have done on how different aspects of corporate governance influence bank performance. We use a random sample of state-chartered community banks in the Midwest and gather detailed information from bank examination reports on the ownership structure of these banks, the policymaking and operational responsibilities of their managers, and the wealth of key bank insiders. The sample banks have a wide range of management, ownership and board structures, thus providing a comprehensive look at various parts of the bank governance framework and the financial incentives that influence managers and owners. Among such incentives are the ownership of bank stock and the importance of this ownership to the overall financial wealth of prominent decision makers within each bank. We find that an ownership stake for hired managers can help improve bank performance, consistent with a reduction in principal-agent problems posited by financial theory. We also find that boards of directors are likely to have a more positive effect on community bank performance when directors have a significant financial interest in the bank. Finally, we find that the wealth and the financial positions of managers and directors significantly influence their own attitudes toward taking risk and their bank’s risk-return trade-offs. Kenneth Spong ,Richard J. Sullivan 2007
 Since banks are among the most important sources not only of finance but also of external governance for firms, the corporate governance of banks is a crucial factor for growth and development. Despite its importance, this topic has been explored only by a few studies. While some authors support, with different arguments in the course of time, the specificity of banks, other authors, among whom Ross Levine and his co-authors from the World Bank, question heavily the present banking regulatory framework. The debate on the corporate governance of banks has a direct bearing on the current discussions on the future of banking regulatory design: should the regulatory intervention be the most important corporate control mechanism in banking or should regulators focus on introducing incentives for appropriate market behaviour? Andrea Polo 2007
High standards in the governance of banks and firms are very important for economic growth. Banks have a critical position in the development of economies due to their major traditional corporate governance mechanism is a matter debated by most research papers on the subject. This study is done on the specific characteristics of banks from the point of view of current economic framework, and the implications of these characteristics on the governance of banks. This paper analyses the environment with increased regulation of the banking firm, as a governance control mechanism. Vasile Cocris,Maria-Cristina Ungureanu 2007
India, with its vast population has emerged as one of the most attractive country for the multi nationals as they scourge around the world to woo the customer. Offering every lucrative kitty from their basket these organizations in their attempt to attract the customer have engaged in number of malpractices damaging the geo, socio, and political climate of the destination (new) country. The governments’ worldwide are building norms and regulations to curb their malpractices. India, too in order to protect its stakeholders from falling into the trap of these companies is gearing up its norms keeping in mind the international benchmarks. Though, having a long history but a short past these regulations have been a part of Indian policies ever since the trading began in an organized form. Right from the time of arrival of East India Company to the Coca Cola, there have been partnerships, mergers, acquisitions and they call for strict and stringent norms to bring ethical behavior of these companies. The present paper talks about the regulatory frameworks since its inception from 1650 onwards. Dimple Grover 2007
A central problem in conducting an event study of the valuation effects of corporate governance reforms is that most reforms affect all firms in a country. Share price changes may reflect the reforms, but could also reflect other information. We address this identification issue by studying India’s adoption of major governance reforms (Clause 49). Clause 49 requires, among other things, audit committees, a minimum number of independent directors, and CEO/CFO certification of financial statements and internal controls. The reforms were sponsored by the Confederation of Indian Industry (an organization of large Indian public firms), applied initially to larger firms, and reached smaller public firms only after a several-year lag. The difference in effective dates offers a natural experiment: Large firms are the treatment group for the reforms. Small firms provide a control group for other news affecting India generally. The May 1999 announcement by Indian securities regulators of plans to adopt what became Clause 49 is accompanied by a 4% increase in the price of large firms over a two-day event window (the announcement date plus the next trading day), relative to smaller public firms; the difference grows to 7% over a five-day event window and 10% over a two-week window. Mid-sized firms had an intermediate reaction. Faster growing firms gained more than other firms, consistent with firms that need external equity capital benefiting more from governance rules. Cross-listed firms gained more than other firms, suggesting that local regulation can sometimes complement, rather than substitute for, the benefits of cross-listing. The positive reaction of large Indian firms contrasts with the mixed reaction to the Sarbanes-Oxley Act (which is similar to Clause 49 in important respects), suggesting that the value of mandatory governance rules may depend on a country’s prior institutional environment. Bernard S. Black ,Vikramaditya S. Khanna 2007
An objective of many proposed corporate governance reforms is increased transparency. This goal has been relatively uncontroversial, as most observers believe increased transparency to be unambiguously good. We argue that, from a corporate governance perspective, there are likely to be both costs and benefits to increased transparency, leading to an optimum level beyond which increasing transparency lowers profits. This result holds even when there is no direct cost of increasing transparency and no issue of revealing information to regulators or product-market rivals. We show that reforms that seek to increase transparency can reduce firm profits, raise executive compensation, and inefficiently increase the rate of CEO turnover. We further consider the possibility that executives will take actions to distort information. We show that executives could have incentives, due to career concerns, to increase transparency and that increases in penalties for distorting information can be profit reducing. Benjamin E. Hermalin,Michael S. Weisbach 2007
In 2001, the Malaysian Code on Corporate Governance (MCCG) became an integral part of Bursa Malaysia Listing Rules, which requires all listed firms to disclose the extent of compliance with MCCG. Our panel analysis of 440 firms from 1999 to 2002 finds that the corporate governance reform in Malaysia has been successful, with a significant improvement in governance practices. The relationship between ownership by Employees Provident Fund (EPF) and corporate governance has strengthened in periods subsequent to the reform, in line with the lead role taken by EPF in establishing the Minority Shareholders Watchdog Group. The implementation of MCCG has a substantial effect on shareholders’ wealth, increasing stock prices by an average of about 4.8%. Although there is no evidence that politically connected firms perform better, political connection has a significantly negative effect on corporate governance, which is mitigated by institutional ownership. Effiezal Aswadi Abdul Wahab,Janice C. Y. How,Peter Verhoeven 2007
This book explores current thinking on corporate governance by way of a detailed study of the governance practices of fourteen Japanese companies. The author of this book was granted extensive access to these Japanese companies, as well as to their partner companies, their shareholders, and their banks, and was therefore able to provide a detailed insight into the way that Japanese companies are actually governed on a day-to-day basis. The book suggests that current mainstream conceptualizations of corporate governance are inadequate, as they do not help to understand the way that these Japanese companies are directed and controlled in practice. In the majority of cases, governance operates through a system which draws on the reciprocal obligations, responsibilities, and trust generated in everyday interactions at the individual and organizational level. The conclusions of the research have important implications not only for our understanding of the Japanese system of corporate governance, but also for international corporate governance policy and research in general. In particular, the book commends greater recognition that alongside the currently dominant concern ‘controlling’ the behaviour of company managers, the governance of companies might equally be considered in terms of the responsibilities, reciprocal obligations, and trust inherent in everyday interactions. Learmount, Simon,2007
To understand the evolving perspectives and behaviour of directors and institutional investors, field research was conducted in 2004-2005 by way of a survey with corporate directors in four countries (Australia, Canada, New Zealand and the United States; n?;equals;?658) and institutional investors in Canada (n?;equals;?34). Reported changes in directors’ views and practices are substantial and consistent across countries, the defining characteristic of which is a fundamental shift in the positioning of the board toward becoming a strategic partner to management. The role of institutional investors also shifted in ways that are complementary to this new role of directors (e.g., toward increased monitoring). While most research has focused on agency concepts of the board as monitors of management, our research suggests that the board is evolving towards a more collaborative role with management, consistent with stewardship theory. Our findings also suggest that directors are seeking a balance between collaboration and their role as monitors of management, rejecting the notion of the board as primarily a monitoring body.

An evolutionary model is offered to explain these changes and implications are discussed. David W. Anderson,Stewart J. Melanson,Jiri Maly 2007
The development of best practice recommendations by the Corporate Governance Council (CGC) of the Australian Stock Exchange in 2003 clearly linked corporate regulators’ concerns about good governance to the concept of corporate social and environmental responsibility. The CGC recommended that one way to demonstrate good governance was to use the annual report to disclose information to all legitimate stakeholders. This paper reports on the quantity and categories of environmental information disclosed in the corporate annual reports of 41 Australian companies across eight industry groups covering the period 1983-2003. This time period has seen the importance of good corporate governance practice in relation to environmental protection escalate, as demonstrated by the introduction of separate environmental and sustainability reports, the advent of triple bottom line reporting, changes in environmental legislation and the occurrence of major environmental incidents. The results of this study indicate that an increasing number of companies are disclosing environmental information, and the relative volume of such information in annual reports is increasing across all categories. Kathy Gibson,Gary O’Donovan 2007
The rapidly increasing worldwide focus on corporate governance has resulted in a proliferation of rating systems that proxy for governance quality. This study develops a governance rating for Greek listed companies by benchmarking their governance structures against three levels: (a) the minimum requirements under Greek regulation (lower level); (b) the incremental recommendations of the Greek code (middle level); and (c) the additional international best practices, prescribed by the UK Combined Code (higher level). Using available data on 274 out of 340 Greek listed companies in 2003 and based on information collected primarily from annual reports, we find that the average governance rating at the lower level is 65.5 per cent; this scoring reduces significantly as we move to the middle and higher level. The average governance rating is 44 per cent. Second, governance scores increase with firm size. Although there may be good reasons explaining these patterns, we find that Greek companies do not provide explanations, i.e. do not practice the “comply or explain” recommendation. Third, our middle level aggregate governance rating is much lower than that reported by prior research that uses a different data gathering and weighting approach. This divergence has important methodological implications. Finally, we document a relatively high lack of transparency in relation to Greek governance practices. Annita Florou,Argiris Galarniotis 2007
This paper studies the impacts of corporate governance on earnings management. We use firm-level governance data, taken from Credit Lyonnais Security Asia (CLSA), of nine Asian countries, in addition to the country-level governance data used in past studies. Our conclusion is as follows. First, firms with good corporate governance tend to conduct less earnings management. Second, there is a “size effect” for earnings smoothing, that is, large size firms are prone to conduct earnings smoothing, but good corporate governance can mitigate the effect on average. Third, there is a turning point for “leverage effect”, i.e. when the governance index is large, “leverage effect” exists, otherwise “reverse leverage effect” exists. It shows that a highly leveraged firm with poor governance is prone to be scrutinised closely and thus finds it harder to fool the market by manipulating earnings. Fourth, firms with higher growth (lower earnings yield) are prone to engage in earnings smoothing and earnings aggressiveness, but good corporate governance can mitigate the effect. Finally, firms in stronger anti-director rights countries tend to exhibit stronger earnings smoothing. Chung-Hua Shen , Hsiang-Lin Chih 2007
The objective of this study is to investigate further the interplay between market globalisation and corporate governance practices. The study is conducted in Canada using a sample of 230 firms listed on the TSX in 2002 and ranked by Report on Business (ROB) on a set of corporate governance best practices. The ROB corporate governance index is built around four categories, namely board composition, compensation, shareholder rights and disclosure. The interaction of the sample companies with the US markets is analysed on the three following dimensions: financial market, product market and multi-markets (combining financial, product and labour markets). Overall, our results show that greater US market interaction is associated with higher corporate governance ratings. Richard Bozec 2007
We examine hypothesized links between the board of directors and firm performance as predicted by the three predominant theories in corporate governance research, namely agency theory, stewardship theory and resource dependence theory. By employing a pattern matching analysis of seven cases, we are able to examine the hypothesized link between board demography and firm performance expected under each theory. We find that while each theory can explain a particular case, no single theory explains the general pattern of results. We conclude by endorsing recent calls for a more process-orientated approach to both theory and empirical analysis if we are to understand how boards add value Gavin J. Nicholson,Geoffrey C. Kiel 2007
This paper sets out to investigate the effects of disclosure, and other corporate governance mechanisms, on equity liquidity, arguing that those companies adopting poor information transparency and disclosure practices will experience serious information asymmetry. Since poor corporate governance leads to greater information asymmetry, liquidity providers will incur relatively higher adverse information risks and will therefore offer higher information asymmetry components in their effective bid-ask spreads. The Transparency and Disclosure (T&D) rankings of the individual stocks on the S&P 500 index are employed to examine whether firms with greater T&D rankings have lower information asymmetry components and lower stock spreads. Our results reveal that the economic costs of equity liquidity, i.e. the effective spread and the quoted half-spread, are greater for those companies with poor information transparency and disclosure practices Wei-Peng Chen,Huimin Chung,Chengfew Lee,Wei-Li Liao 2007.
This article presents an analysis of the newly created European company Societas Europaea (SE) focusing on the consequences for European corporate governance. The SE offers the possibility to organise the management of a SE as a one-tier, or alternatively a two-tier, system. It is argued that this flexibility will not result in a single board system prevailing in equilibrium, but instead this choice will be made depending on each firm’s business environment. Thus, the SE gives the management the option to incorporate in another member state. As argued, this will, eventually, lay the ground for a European market for incorporations. Important issues such as investor protection and dual-class voting shares are also analysed. The most controversial topic in the creation process of the SE was the role of the employees. The article completes with a discussion of the employees’ role in relation to the opponent doctrines of shareholder vs stakeholder value Caspar Rose 2007
It is generally believed that poor corporate governance has been the Achilles’ heel of many corporations in both rich and poor nations. This is particularly true of Nigeria, where corruption is endemic. However, following the change of government in 1999, the Federal Government is keen to attract foreign investments into the country. Given the high correlation between corporate governance and investor decisions, the government is keen to position the country to take advantage of the opportunities in the global market by adhering to principles of good governance. Yet not much is known about the state of, or the current framework for, corporate governance in Nigeria. By providing a comprehensive review of the state of corporate governance in Africa’s most populous country, this paper makes a contribution to the literature on the state of corporate governance in developing countries. The paper examines the mechanism for corporate governance, including the requirements of the recently established Code of Best Practices for Public Companies in Nigeria. In particular, it examines the roles of the government, the Corporate Affairs Commission, the Securities and Exchange Commission, the Nigerian Stock Exchange, the representatives of the shareholders of the companies, directors, auditors and the Audit Committee in the governance process. The paper addresses the issue of whether the governance mechanisms in Nigeria are adequate in the face of the changes and challenges in the global corporate scene. It argues that whilst there is a case for adherence to global corporate governance standards, any Code of Best Practices adopted in Nigeria must reflect its peculiar socio-political and economic environment, whilst at the same time providing the right assurance to prospective and existing shareholders. Elewechi N. M. Okike 2007
The board of directors is one of a number of internal governance mechanisms that are intended to ensure that the interests of shareholders and managers are closely aligned, and to discipline or remove ineffective management teams. Among the most significant governance issues currently faced by the modern corporation are those relating to diversity, such as gender and age, and independence of directors. Helen Kang,Mandy Cheng,Sidney J. Gray 2007
This paper tests the relationship between ownership/leadership structures and stock returns for firms listed in Taiwan. A “Governance Index” is built based on four different aspects of the company’s governance structure: 1. CEO duality, 2. Size of the board of directors, 3. Managements’ holdings and 4. Block shareholders’ holding. This index is used as a proxy measure of the effectiveness of the corporate governance mechanism. We propose that firms under good governance should outperform those under poor governance. We find a striking relationship between our governance index and stock performance of firms. The results imply that our corporate governance index is successful in evaluating the effectiveness of the governance mechanism of firms in Taiwan. Anlin Chen,Lanfeng Kao,Meilan Tsao,Chinshun Wu 2007
We propose that the extent to which regulation and competitiveness play a role in the country environment has a complex, interactive effect on the relationship between corporate governance and firm performance. Using an analytical method, we develop an algorithm to express these effects, and offer proofs to show that our algorithm meets central conditions that are identified based on extant research findings in this domain. An illustration traces the performance of firms with different corporate governance standards across various environmental conditions. Krishna Udayasankar,Shobha S. Das 2007
According to Credit Lyonnais Securities Asia, Singapore has the best corporate governance practices in Asia. Malaysia has had the biggest improvements in governance overtime. Thailand lags behind both in achieving appropriate governance. This paper considers recent developments in corporate governance through the analysis of the corporate websites of financial corporations in these countries. The study finds that the corporate governance practices of Thai, Malaysian and Singaporean financial corporations are consistent with international best practices. Corporate governance as presented in company documents probably does not actually reflect real corporate governance practices. These practices do not have an impact on company performance. The level of corporate governance reported is also not consistent with the ratings from international financial institutions such as Credit Lyonnais Securities Asia and Standard ; Poor’s. These findings suggest that corporate governance in ASEAN is more illusion than fact. Wiparat Chuanrommanee Fredric William Swierczek 2007
China has reformed its enforcement mechanisms of accounting practices, in particular, corporate governance, in order to facilitate the harmonisation of Chinese accounting practices with IFRS practices. However, this research reveals that the reformed corporate governance has not made a significant contribution towards this harmonisation. The move of Chinese accounting practices towards IFRS practices is mainly due to the CSRC’s 2001 compulsory harmonisation policy of eliminating the earnings gap. Corporate governance as an important enforcement mechanism for accounting standards has yet to be effective. Jean Jinghan Chen,Peng Cheng 2007
Are the risk and control developments in corporate governance changing the role of the external auditor? This paper examines how the concepts of risk and control are incorporated in current corporate governance promulgations and analyses the implications for the role of the external auditor. It is suggested that up till now the corporate governance debate has strengthened the position or role of the internal auditor in the advantage of the role of the external auditor. The promulgations have influenced the internal control mechanisms, and the control responsibilities have become more explicit. Dominant determinants for the future role of the external auditor seem to be in conflict, namely the value adding function of the audit with an alignment of risk oriented efforts by the auditor and the company versus the notion of “back to basics”. The external auditors ought to recognise that they must be perceived as “the” experts regarding internal control and risk management and that this must be engrained as part of the service rendered, i.e. part of the value adding nature of an audit. At the same time they must improve the transparency of the audit standards and the communication processes of audit reporting. Claus Holm ,Peter Birkholm Laursen 2007
Motivated by the ongoing post-Enron refocusing on corporate governance and the shift by the Financial Services Authority (FSA) in the UK to promoting compliance-competence within the financial services sector, this paper demonstrates how template analysis can be used as a tool for evaluating compliance-competence. Focusing on the ethical dimension of compliance-competence, we illustrate how this can be subjectively appraised. We propose that this evaluation technique could be utilised as a starting point in informing senior management of corporate governance issues and be used to monitor and demonstrate key compliance and ethical aspects of an institution to external stakeholders and regulators. Jonathan Edwards, Simon Wolfe 2007
A growing literature discusses the convergence of national systems of corporate governance. Fostering convergence are activist institutional investors, especially from the United States. The following is a case study of one institutional investor – the giant pension fund, CalPERS – and its efforts to change governance in Japan over the past 15 years. CalPERS’ involvement in Japan went through three stages: solo activism; cultivation of local partners; and, most recently, a shift from marketwide activism to company-level relational investing. Although CalPERS has had some success in changing Japanese corporate governance, economic and political factors have limited its influence and permitted the persistence of Japan’s distinctive governance system. Sanford M. Jacoby2007
Japanese corporate governance can be analysed in terms of a defining characteristic of “internalism”: the belief that companies should be controlled by internally appointed managers who are integrated into their firms. Examples are offered from recent contacts with corporate management and other sources to illustrate how this determines the response of management to specific developments. Internalism depends on a socio-corporate environment created by specific historical and economic circumstances. Potentially disruptive elements exist which could alter this environment and undermine the foundations on which internalism rests. However, major change seems unlikely in the near future. John Buchanan 2007
This study analyses the impact of corporate governance (CG) mechanisms on valuations of selected companies in Fast Moving Consumer Goods and Information Technology sectors in India. The study is carried out for the period 2002–2006 because improvement initiatives of CG were undertaken during the period. The panel data regression method is used to examine the impact of CG factors on market valuation. Data consisting of a sample of 30 companies for the entire five-year period represent the database for this study. Results obtained showed an overall strong significant relationship between CG and market value of a firm. Of all the CG mechanisms (representing CG) studied, however, only shareholders’ rights, and value creation for stakeholders, emerged as important for impact on the valuation. The findings are expected to have practical implications for directors, owners and regulators to formulate the CG codes and guidelines. Nisha Kohli1 and Gour C Saha22008
The paper makes a case for corporate governance as an internal mechanism in banks, and therefore influenced by cultural issues, to dovetail with the overriding compulsions of prudential regulation, that sets the boundaries for systemic stability. The dynamic changes in the structure of global financial markets and the blurring of boundaries between different players — banks, investment banks and hedge funds, pose new challenges for financial regulators. This is especially crucial in the context of structural mechanisms that are in place to run the new financial conglomerates. From a regulatory perspective, the key issue would be the presence of unregulated entities/holding companies in the structure. The presence of any unregulated entity within the Bank Holding Company/Financial Holding Company structure, especially an unregulated intermediate holding company, may prove to be a weak link in the entire structure, providing scope for regulatory arbitrage. As is evident from the recent sub-prime problems originating in the United States, all financial entities are interdependent and the collapse of any one, not necessarily a commercial bank, involves a systemic risk and may propel the financial regulator to save it. In the context of overriding compulsions of financial stability and the inherent limitations of any external regulation to anticipate all innovative, exotic derivative products and eliminate the propensity of excessive risk-taking by a bank/financial entity, regulators worldwide, and in India, are placing more and more responsibility on bank boards. This has entailed, on the part of the board, a better quantitative understanding of the risks inherent in specific lines of activity and a clear assessment of possible impact on the financials. In the Indian context, the Reserve Bank of India (RBI) has put in place detailed regulations related to the composition of bank boards, the ‘fit and proper’ criteria for appointment of directors, transparency and disclosure norms for derivative products, related-party transactions, risk-based internal audit and other crucial components of banks’ corporate governance architecture. The systemic risk posed by such financial conglomerates (FC), because of possible regulatory arbitrage, is sought to be plugged by a system for all the identified FC whereby a designated entity within the conglomerate reports to its lead regulator. In order to monitor the intra-group transactions and exposures, information from the designated entities of each FC is obtained by the principal regulators and a system for exchange of information among the regulators has been put in place. Mixed ownership of government (as a majority shareholder) and private (almost all public sector banks are listed on the stock exchange) also poses a unique challenge of divergent objectives of shareholding and the issues of reconciling them. In the final analysis, corporate governance is a continuous process of evolving best practices in response to market developments. RBI cannot be complacent. This is the constant thrust of RBI’s initiatives in ensuring a vibrant corporate governance framework. Shyamala Gopinath1 2008
The banking sector is somewhat unique because it is simultaneously consolidating and diversifying. Banks’ major role in stabilising the financial systems of countries and in spurring their economic growth explains the particularities of their own corporate governance. The specificity of banks, the volatility of financial markets, increased competition and diversification expose banks to risks and challenges. The banking industry is heavily regulated and supervised in every country around the globe. This, in turn, establishes a particular corporate governance system. The paper lays out the specific attributes of banks that influence their regulatory and supervisory environment, which creates a unique corporate governance framework for the banking industry. The paper emphasises the benefits and limits of regulations and supervision on banks’ corporate governance and focuses its empirical results on the European Union countries Maria-Cristina Ungureanu 2008
Regulation and supervision set a particular corporate governance framework for the banking industry. The specificity of banks, the volatility of financial markets, increased competition and diversification expose banks to risks and challenges. Managing financial risk is a key element for improving corporate governance in the banking sector. The article examines key factors that contribute to ensuring an effective regulatory and supervisory framework. Particularly, it analyses the structure and scope of bank supervision, emphasising the importance of its consolidation in the European context. Maria-Cristina Ungureanu 2008
We provide an overview of Indian corporate governance practices, based primarily on responses to a 2006 survey of 370 Indian public companies. Compliance with legal norms is reasonably high in most areas, but not complete. We identify areas where Indian corporate governance is relatively strong and weak, and areas where regulation might usefully be either relaxed or strengthened. On the whole, Indian corporate governance rules appear appropriate for larger companies, but could use some strengthening in the area of related party transactions, and some relaxation for smaller companies. Executive compensation is low by U.S. standards and is not currently a problem area. We also examine whether there is a cross-sectional relationship between measures of governance and measures of firm performance and find evidence of a positive relationship for an overall governance index and for an index covering shareholder rights. We find an overall association, which is stronger for more profitable firms and firms with stronger growth opportunities. A subindex for shareholder rights is individually significant, but subindices for board structure (board independence and committee structure), disclosure, board procedure, and related party transactions are not significant. The non-results for board structure contrast to other recent studies, and suggest that India’s legal requirements are sufficiently strict so that overcompliance does not produce valuation gainsBala N. Balasubramanian ,Bernard S. Black,Vikramaditya S. Khanna 2008,2009
Corporate governance has received an increasing amount of attention in recent years. Corporate scandals have brought corporate governance weaknesses to the attention of the general public, especially in the United States. But corporate governance is sometimes a problem in other countries as well. This paper begins with an overview of some basic corporate governance principles as identified by the OECD, World Bank and IMF, then proceeds to examine how these principles are being applied in selected Asian countries. R obert W. McGee 2008
Corporate governance has received an increasing amount of attention in recent years. Corporate scandals have brought corporate governance weaknesses to the attention of the general public, especially in the United States. Weaknesses in the corporate structure of some Asian countries have been partly blamed for some recessions that have occurred there. This paper begins with an overview of some basic corporate governance principles asidentified by the OECD, World Bank and IMF, then proceeds to examine how these
principles are being applied in Indonesia, Malaysia, Thailand and Vietnam. Robert W. McGee 2008
The 2005 policy decision to change the status of non-tradable state and non-state shares into tradable A shares ushers in a new era in the stock markets of China. Over time all of these shares will be tradable and potentially transferred to foreign and domestic private sector investors. These changes have the potential to significantly alter the monitoring and control of the majority of listed firms that until now have been controlled by tightly held blockholders of non-tradable shares. It is therefore timely to reassess the corporate governance of Chinese listed firms. This paper reviews the theoretical and empirical corporate governance literature in China. Larry Li,Tony Naughton ,Martin Hovey 2008.     This paper looks at the reformation of corporate governance Indonesia in the sector of state-owned enterprises, especially from the perspective of law. The focusing is to examine the voluntary and mandatory corporate governance models by comparing the prevailing corporate governance systems, pre-existing in several countries such as the US, Australia, Germany and Indonesia. The voluntary model means listed companies that might not abide by the principles but have to provide sufficient and reasonable arguments as to why it is not complying are protected against; while the latter is a model in which a listed company has to comply with the corporate governance code for avoiding penalties.The US employs the mandatory model; Australia, Germany and Indonesia apply the voluntary one.This paper suggests that the mandatory model is suitable to be implemented. The existing of corporate spivs and new hope of the Indonesian Corruption Eradication Commission are the article’s central arguments to suggest employing the mandatory model. Miko Kamal 2008
The relationship between ownership structure and company performance has been issue of interest among academics, investors and policy makers because of key issue in understanding the effectiveness of alternative governance system in which government ownership serve as a control mechanism. Therefore, this paper examines the impact of an alternative ownership/control structure of corporate governance on firm performance among government linked companied (GLCs) and Non-GLC in Malaysia. It is believed that government ownership serve as a monitoring device that lead to better company performance after controlling company specific characteristics. We used Tobin’s Q as market performance measure while ROA is to determine accounting performance measure. This study is based on a sample of 210 firms over a period from 1995 to 2005. We use panel based regression approach to determine the impact of ownership mechanism on firm’s performance. Findings appear to suggest that there is a significant impact of government ownership on company performance after controlling for company specific characteristics such as company size, non-duality, leverage and growth. The finding is off significant for investors and policy marker which will serve as a guiding for better investment decision. Rubi Ahmad ,Huson Joher Aliahmed ,Nazrul Hisyam Ab Razak Sr.2008
This article examines corporate governance and regulation in the context of the current global financial crisis (GFC). Taking into account the concept of government and self-regulation as well as the danger of contagion and systematic risk, it is demonstrated that a complex web of interrelated failures – in both corporate governance and government regulation – have not only caused but also prolonged the GFC. Executive compensation, ERM systems, CEO-Chairman duality, as well as independence and competence of the board of directors not only defines an area for possible regulatory reforms but also reveal the ability of companies to effectively use the freedom being associated with the notion of self-regulation. Examining government regulations, such as residential, tax, finance, and monetary policies in the US and other countries, as well as international banking supervision accords (Basel) illustrate that not only failures in corporate governance but even more a number of government regulations were causal for the GFC. In addition, recent state interventions and draft laws, that is, monetary measures and restrictions for short-selling and executive compensation, indicate the danger of overregulation and the implementation of further imprudent policies. This article recommends concrete steps to be taken by companies and governments in order to address revealed weaknesses and correct existing failures. In some cases, especially in crisis management, new government regulation and interventions are unavoidable but should be based on appropriate diagnoses of the root problems and important principles such as transparency, risk control, and international cooperation Ruppel Conrad C H,2009
Over the past two decades, corporate governance reforms have emerged as a central focus of corporate law in countries across the development spectrum. Various legal scholars studying these reform efforts have engaged in a vigorous debate about whether globalization will lead to convergence of corporate governance laws toward one model of governance: namely the Anglo-American, dispersed shareholder model, or whether existing national characteristics will thwart convergence. Despite rapid economic growth and reforms in developing countries such as India, the legal literature discussing this debate primarily focuses on developed economies.

This Article examines recent corporate governance reforms in India as a case study for evaluating the competing claims on global convergence of corporate governance standards currently polarizing the field of corporate law. This Article seeks to make a fresh contribution to the convergence debate by examining the implications of India’s corporate governance reform efforts. It contends that the Indian experience demonstrates that traditional theories predicting convergence, or a lack thereof, fail to fully capture the trajectory of actual corporate governance reforms. India’s reform efforts demonstrate that while corporate governance rules may converge on a formal level with Anglo-American corporate governance norms, local characteristics tend to prevent reforms from being more than merely formal. India’s inability to effectively implement and enforce its extensive new rules corroborates the argument that comprehensive convergence is limited, and that the transmission of ideas from one system to another is highly complex and difficult, requiring political, social and institutional changes that cannot be made easily. Afra Afsharipour2009
Public opinion in the West since the arrest of Yukos’ Chief Executive in October 2003 has been consistently against the Russian Government particularly Putin who was the President then and is now the Prime Minister. The prospect of Putin returning to the Presidency after the next poll has added to the stridency of his detractors. The admiration for Yukos’ adoption of international standards on corporate governance still weighs with the supporters of the convicted CEO, who continues to be seen as a victim of political persecution directed against his efforts towards “Civilised Capitalism”. This paper delves into various aspects of Yukos’ management and seeks to examine the possible role of irregularities vis-à-vis the political ambitions of the chief executive in the dismemberment of the Russia’s top company. There are parallels as well as dissimilarities among Yukos, Satyam and Samsung although pursuit of irregularities is a common factor. However, the South Korean Chaebol is placed differently in that punishments for corporate irregularities are in the form of charity, community service and support for the welfare initiatives of the Government. In India itself, Satyam is a rare instance where nearly everyone is agreed on hanging the dishonoured CEO by the nearest post and to make an example of him. Yet, business-related frauds and aberrations get either soft treatment or allowed to go unnoticed. This paper also takes a close look at the US record of corporate misconduct, the Enron scandal as well as the massive deception by leading financial players and negligent regulation boarding on collusion that added up to the meltdown. Prof.Ramachandran.K.S.,Professor and Head .2009
In this study we examine the determinants of CEO compensation in large listed Indian companies. There is a positive relation between pay and a firm’s performance. We find that remuneration committees are related to higher CEO compensation and there is no association between remuneration committees and pay-performance sensitivities. Thus, remuneration committees do not act in the way predicted by governance guidelines. CEOs in family firms are paid more. This suggests that CEOs use their power as a member of the controlling family to obtain higher compensation. The minority shareholders are therefore disadvantaged. CEOs in risky firms are paid less. Manju Jaiswall, Michael Firth,2009
This paper is a survey of the literature on boards of directors, with an emphasis on research done subsequent to the Hermalin and Weisbach (2003) survey. The two questions most asked about boards are what determine their makeup and what determines their actions? These questions are fundamentally intertwined, which complicates the study of boards because makeup and actions are jointly endogenous. A focus of this survey is how the literature, theoretical as well as empirically, deals – or on occasions fails to deal – with this complication. We suggest that many studies of boards can best be interpreted as joint statements about both the director-selection process and the effect of board composition on board actions and firm performance. Renee B. Adams ,Benjamin E. Hermalin ,Michael S. Weisbach 2008,2009
We investigate which provisions, among a set of twenty-four governance provisions followed by the Investor Responsibility Research Center (IRRC), are correlated with firm value and stockholder returns. Based on this analysis, we put forward an entrenchment index based on six provisions – four constitutional provisions that prevent a majority of shareholders from having their way (staggered boards, limits to shareholder bylaw amendments, supermajority requirements for mergers, and supermajority requirements for charter amendments), and two takeover readiness provisions that boards put in place to be ready for a hostile takeover (poison pills and golden parachutes). We find that increases in the level of this index are monotonically associated with economically significant reductions in firm valuation, as measured by Tobin’s Q. We present suggestive evidence that the entrenching provisions cause lower firm valuation. We also find that firms with higher levels of the entrenchment index were associated with large negative abnormal returns during the 1990-2003 period. Moreover, examining all sub-periods of two or more years within this period, we find that a strategy of buying low entrenchment firms and selling short high entrenchment firms out-performs the market in most such periods and does not under-perform the market even in a single sub-period. Finally, we find that the provisions in our entrenchment index fully drive the correlation, identified by prior work, that the IRRC provisions in the aggregate have with reduced firm value and lower stock returns during the 1990s; we do not find any evidence that the other eighteen IRRC provisions are negatively correlated with either firm value or stock returns during the 1990-2003 period.Data on the entrenchment index for the period 1990-2007, and a list of over seventy-five studies using our entrenchment index, is available for downloading at Lucian Bebchuk’s home page. Lucian A. Bebchuk,Alma Cohen,Allen Ferrell 2009,2004
This paper investigates the role of corporate governance in the 2007-2008 financial crisis, using a unique dataset of 296 financial firms from 30 countries that were at the center of the crisis. Paradoxically, we find that while boards and shareholders appear to have executed their monitoring role by replacing poorly performing CEOs during the crisis, they also seem to have encouraged investments in subprime mortgage related assets that led to large losses during the crisis. Further exploration of the relation between governance and shareholder losses finds evidence consistent with shareholders having encouraged managers to take aggressive risks before the crisis, but does not find evidence consistent with boards having done so. Instead, our findings suggest that reputational concerns of board members explain why firms with more independent boards suffered from worse stock returns and recognized larger writedowns during the crisis. In particular, we find that firms with more independent boards were more likely to raise capital during the crisis, even though this came at a great cost to existing shareholders. In addition, we find that firms with more independent boards were more likely to disclose writedowns, which made it appear as if these firms recognized larger writedowns than other firms. Overall, our results are inconsistent with the losses during the financial crisis being the result of lax oversight by boards and investors. Rather, our results are consistent with risk-taking
encouraged by shareholders and reputational concerns of directors having contributed to the losses. David Erkens,Mingyi Hung,Pedro P. Matos 2009
In 2008, share prices on U.S. stock markets fell further than they had during any one year since the 1930s. Does this mean corporate governance “failed”? This paper argues “no”, based on a study of a sample of companies at “ground zero” of the stock market meltdown, namely the 37 firms removed from the iconic S&P 500 index during 2008. The study, based primarily on searches of the Factiva news database, reveals that institutional shareholders were largely mute as share prices fell and that boardroom practices and executive pay policies at various financial firms were problematic. On the other hand, there apparently were no Enron-style frauds, there was little criticism of the corporate governance of companies that were not under severe financial stress and directors of troubled firms were far from passive, as they orchestrated CEO turnover at a rate far exceeding the norm in public companies. The fact that corporate governance functioned tolerably well in companies removed from the S&P 500 implies that the case is not yet made out for fundamental reform of current arrangements. Brian R. Cheffins 2009
This paper, which introduces the special issue on corporate governance co-sponsored by the Review of Financial Studies and the National Bureau of Economic Research (NBER), reviews and comments on the state of corporate governance research. The special issue feature seven papers on corporate governance that were presented in a meeting of the NBER’s corporate governance project. Each of the papers represents state-of-the-art research in an important area of corporate governance research. For each of these areas, we discuss the importance of the area and the questions it focuses on, how the paper in the special issue makes a significant contribution to this area, and what we do and do not know about the area. We discuss in turn work on shareholders and shareholder activism, directors, executives and their compensation, controlling shareholders, comparative corporate governance, cross-border investments in global capital markets, and the political economy of corporate governanceLucian A. Bebchuk ,Michael S. Weisbach 2009,2010
Though overall bank performance from July 2007 to December 2008 was the worst since at least the Great Depression, there is significant variation in the cross-section of stock returns of large banks across the world during that period. We use this variation to evaluate the importance of factors that have been discussed as having contributed to the poor performance of banks during the credit crisis. More specifically, we investigate whether bank performance is related to bank-level governance, country-level governance, country-level regulation, and bank balance sheet and profitability characteristics before the crisis. Banks that the market favored in 2006 had especially poor returns during the crisis. Using conventional indicators of good governance, banks with more shareholder-friendly boards performed worse during the crisis. Banks in countries with stricter capital requirement regulations and with more independent supervisors performed better. Though banks in countries with more powerful supervisors had worse stock returns, we provide some evidence that this may be because these supervisors required banks to raise more capital during the crisis and that doing so was costly for shareholders. Large banks with more Tier 1 capital and more deposit financing at the end of 2006 had significantly higher returns during the crisis. After accounting for country fixed effects, banks with more loans and more liquid assets performed better during the month following the Lehman bankruptcy,and so did banks from countries with stronger capital upervision and more restrictions on bank activities. Andrea Beltratti,Rene M. Stulz 2009
The claim is often made that corporate governance is an attempt to balance corporate interests with individual and societal interests. Lord Adrian Cadbury, who chaired the Cadbury Commission that produced the Cadbury Report on Corporate Governance in the UK, claims that the objective of corporate governance “is to align as nearly as possible the interests of individuals, corporations and society”. This paper will test whether this claim can be substantiated on the theoretical and practice level. To test this claim on the theoretical level the concept of corporate governance will be analysed in order to determine whether the said balance is implied by the concept of corporate governance. In order to determine whether the claim find support in corporate governance practices around the world, six continental or regional reports on the relationship between business ethics and corporate governance, representative of the various regions of the world (Africa, Asia-Pacific region, Europe, Japan, Latin America and North America), will be analysed critically. On the basis of this conceptual and corporate governance practice analysis an assessment will be made of whether corporate governance is about “aligning as nearly as possible the interests of individuals, corporations and society”. GJ Rossouw 2009
Are corporations, in general, amenable to good governance? Are there inherent incompatibilities between good governance and the corporate format of organizations? How can these be addressed satisfactorily without over-regulation that might impair entrepreneurial potential? These are some of the nagging issues this paper explores and offers some radical suggestions for consideration. Bala N. Balasubramanian2009
This Article examines India’s initial corporate governance reform efforts as well as reforms adopted in the aftermath of the Satyam scandal. An evaluation of India’s corporate governance reforms demonstrates that although extensive reforms have been instituted, there remain significant lapses in implementation and enforcement. Moreover, many of the reforms that have been adopted fail to address fundamental areas of concern such as the relationship between controlling and minority shareholders, the role of promoters, the limited activism of shareholders, including institutional investors, and issues with director
Independence. This Article expresses concerns that these challenges may prevail because they have been shaped by unique political and social forces. These forces include the traditional closed ownership structures of Indian firms, an ineffective institutional framework to support enforcement efforts, weaknesses in investor access to the courts, and political pressures related to government ownership of certain industries. Afra Afsharipour,2010
This study investigates the relationship between corporate governance characteristics and voluntary disclosure in the annual reports of 170 Kuwaiti companies listed on the Kuwait Stock Exchange in 2007. We first identified four major corporate governance characteristics: proportion of non-executive directors to total number of directors on the board; proportion of family members to total number of directors on the board; role duality; and a voluntary audit committee. We then used univariate and multivariate regression analyses to examine the relationship between these characteristics and voluntary disclosure in annual reports. Using a self-disclosure index to measure voluntary disclosure, the average level of voluntary disclosure by sample companies is 19 per cent, indicating some improvement over the sample companies in an earlier study by Al-Shammari (2008), who found 15 per cent voluntary disclosure. This result suggests a trend toward more transparency by Kuwaiti companies. The results indicate that only the existence of a voluntary audit committee is significantly and positively related to the extent of voluntary disclosure. The result is robust with respect to controls for company size, leverage, auditor type and industry memberships. These results indicate the need to improve Kuwaiti market transparency through additional constraints on corporate governance characteristics. It is believed that this result will prove useful to regulators, preparers of financial statements and investors. Specifically, users of accounting information like investors may consult the findings to understand Kuwaiti companies better when diversifying their investment portfolios. Bader Al-Shammari1 and Waleed Al-Sultan2 2010
In this study we examine the relation between corporate governance and institutional ownership. Our empirical results show that the fraction of a company’s shares that are held by institutional investors increases with the quality of its governance structure. In a similar vein, we show that the proportion of institutions that hold a firm’s shares increases with its governance quality. Our results are robust to different estimation methods and alternative model specifications. These results are consistent with the conjecture that institutional investors gravitate to stocks of companies with good governance structure to meet fiduciary responsibility as well as to minimize monitoring and exit costs.

Kee H Chung and Haa Zhang05 November 2010
role in running the financial system. The banking industry is unique because it is simultaneously consolidating and diversifying. There is a significant public dimension to the banking firm; bank managers function in the light of two distinct sets of interests: one is the private interest, internal to the firm, and the other is the public interest, external to the firm. Previous literature analyses the implications of banks’ specific attributes on their corporate governance framework. It emphasizes two major aspects: greater opaqueness and greater regulation. Whether these attributes have a weakening effect on the Poor corporate governance of banks has increasingly been acknowledged as an important cause of the recent financial crisis. Given the developments since the Asian financial crisis in 1997, this fact is not readily to be explained. Listed banks and even non-listed firms worldwide have publicly emphasized that good corporate governance is of vital concern for the company, and have adopted firm-specific corporate governance codices. Moreover, banking supervisors have taken up the issue. In particular, the Basel Committee on Banking Supervision has already published two editions of a guideline entitled “Enhancing corporate governance for banking organizations” which perfectly reflects the supervisors’ perception of and approach to the issue Still, only during the second year of the financial crisis, the issue of banks’ good corporate governance has again started to attract pronounced interest. Given the numerous reforms to improve banks’ corporate governance that have either been proposed or already implemented at the international level, national, and supranational, e.g. E.U., levels, the article takes stock of relevant theory and examines recent reforms in light of the empirical evidence. Taking the well-known question “What makes banks different?” (Fama) as a starting point, the theoretical part first analyses the particularities of banks’ corporate governance with respect to a bank’s financiers (shareholders, depositors, and bondholders) in a principal-agent framework and finds that banks’ corporate governance mostly differs from that of a generic firm because of deposit insurance and prudential regulation. While aimed at compensating for deficits in the monitoring and control of banks, both institutions serve to exacerbate the particular problems that are inherent in banks’ corporate governance. The theoretical part, then, presents the supervisors’ financial stability perspective as illustrated by the Basel Committee’s guidance, and concludes with a discussion of the functional relationship between corporate governance and banking regulation/supervision: Whereas banking regulation/supervision acts as a functional substitute for debt governance, equity governance benefits less from such regulation/intervention. Put succinctly, shareholder interests and supervisors’ interests do not run exactly parallel, not even from a long-term perspective. The following part provides an overview of the numerous reform initiatives in light of emerging empirical research on the corporate governance-failure hypothesis, and presents some more ideas for reforms. Of particular interest to this discussion are risk management, board composition, and executive remuneration. The article concludes with some tentative reflections on the lessons from banks’ corporate governance for corporate governance of generic firms, i.e., firms not subject to prudential regulation/supervision. Because of the particularities due to the existence of deposit insurance and prudential regulation/supervision, one may doubt whether banks’ corporate governance should map the way forward for corporate governance.

Poor corporate governance of banks has increasingly been acknowledged as an important cause of the recent financial crisis. Given the developments since the Asian financial crisis in 1997, this fact is not readily to be explained. Listed banks and even non-listed firms worldwide have publicly emphasized that good corporate governance is of vital concern for the company, and have adopted firm-specific corporate governance codices. Moreover, banking supervisors have taken up the issue. In particular, the Basel Committee on Banking Supervision has already published two editions of a guideline entitled “Enhancing corporate governance for banking organisations” which perfectly reflects the supervisors’ perception of and approach to the issue Still, only during the second year of the financial crisis, the issue of banks’ good corporate governance has again started to attract pronounced interest. Given the numerous reforms to improve banks’ corporate governance that have either been proposed or already implemented at the international level, national, and supranational, e.g. E.U., levels, the article takes stock of relevant theory and examines recent reforms in light of the empirical evidence. Taking the well-known question “What makes banks different?” (Fama) as a starting point, the theoretical part first analyses the particularities of banks’ corporate governance with respect to a bank’s financiers (shareholders, depositors, and bondholders) in a principal-agent framework and finds that banks’ corporate governance mostly differs from that of a generic firm because of deposit insurance and prudential regulation. While aimed at compensating for deficits in the monitoring and control of banks, both institutions serve to exacerbate the particular problems that are inherent in banks’ corporate governance. The theoretical part, then, presents the supervisors’ financial stability perspective as illustrated by the Basel Committee’s guidance, and concludes with a discussion of the functional relationship between corporate governance and banking regulation/supervision: Whereas banking regulation/supervision acts as a functional substitute for debt governance, equity governance benefits less from such regulation/intervention. Put succinctly, shareholder interests and supervisors’ interests do not run exactly parallel, not even from a long-term perspective. The following part provides an overview of the numerous reform initiatives in light of emerging empirical research on the corporate governance-failure hypothesis, and presents some more ideas for reforms. Of particular interest to this discussion are risk management, board composition, and executive remuneration. The article concludes with some tentative reflections on the lessons from banks’ corporate governance for corporate governance of generic firms, i.e., firms not subject to prudential regulation/supervision. Because of the particularities due to the existence of deposit insurance and prudential regulation/supervision, one may doubt whether banks’ corporate governance should map the way forward for corporate governance. Peter O. Mülbert 2010,
We review accounting and finance research on corporate governance (CG). In the course of our review, we focus on a particularly vexing issue, namely endogeneity in the relationships between CG and other matters of concern to accounting and finance scholars, and suggest ways to deal with it. Given the advent of large commercial CG databases, we also stress the importance of how CG is measured and in particular, the construction of CG indices, which should be sensitive to local institutional arrangements, and the need to capture both internal and external aspects of governance. The ‘stickiness’ of CG characteristics provides an additional challenge to CG scholars. Better theory is required, for example, to explain whether various CG practices substitute for each other or are complements. While a multidisciplinary approach to developing better theory is never without its difficulties, it could enrich the current body of knowledge in CG. Despite the vastness of the existing CG literature, these issues do suggest a number of avenues for future research. Philip Brown, Wendy Beekes, Peter Verhoeven  11 November 2010
In public-policy discussions about corporate disclosure, more is typically judged better than less. In particular, better disclosure is seen as a way to reduce the agency problems that plague firms. We show that this view is incomplete. In particular, our theoretical analysis shows that increased disclosure is a two-edged sword: More information permits principals to make better decisions; but it can, itself, generate additional agency problems and other costs for shareholders, including increased executive compensation. Consequently, there can exist a point beyond which additional disclosure decreases firm value. We further show that larger firms will tend to adopt stricter disclosure rules than smaller firms, ceteris paribus. Firms with better disclosure will tend, all else equal, to employ more able management. We show that governance reforms that have imposed greater disclosure could, in part, explain recent increases in both ceo compensation and ceo turnover rates. Benjamin E. Hermalin January 30, 2011
The traditional economics of innovation, inspired by Schumpeter and more recent advances on his work, seem unable to explain why firms with similar external conditions may show greatly different performance in innovation. Contrastingly, the literature on corporate governance provides some useful insights for understanding corporate innovation activity, to the extent that such literature examines the economic effects of different modes of coordination between firm members. The process through which individuals integrate their human and physical resources within the firm is central to the dynamics of corporate innovation. This paper provides the first survey of the literature on this issue. We start by discussing how various theoretical approaches to the analysis of the firm deal with technological innovation. We then describe three main channels – corporate ownership, corporate finance and labour – through which a system of corporate governance shapes a firm’s innovation activity. Finally, we examine the relationship between country-level institutional settings, national patterns of corporate governance and the aggregate innovation activity of corporations. We conclude by suggesting that future research should focus more deeply on the interrelation between the various dimensions of corporate governance and on their joint effect on firm innovation.

115 Filippo Belloc10 March 2011
Most corporate governance research focuses on the behavior of chief executive officers, board members, institutional shareholders, and other similar parties. Little research focuses on the impact of executives whose primary responsibility is to enforce and shape corporate governance inside the firm. This study examines the role of the general counsel (GC) in mitigating informed trading by corporate insiders. We find that insider trading profits and the predictive ability of insider trades for future operating performance are generally higher when insiders trade within firm-imposed restricted trade windows. However, when GC approval is required to execute a trade, insiders’ trading profits and the predictive ability of insider trades for future operating performance are substantively lower. Thus, when given the authority, it appears the GC can effectively limit the extent to which corporate insiders use their private information to extract rents from shareholders.116 ALAN D. JAGOLINZER, DAVID F. LARCKER, DANIEL J. TAYLOR 7 September 2011
.This research deals with the contribution of good governance practices to stakeholder’s satisfaction. The aim of this paper is to demonstrate that the good governance practices are a driver of stakeholder’s satisfaction and therefore a factor of a sustainable competitive advantage development in the developing economies that do not have active markets and sound external institutions with the power to establish .goodcorporategovernancepractices.The literature review provides core references related to the the good corporate governance conceptualization through three dimensions: Prerequisites (Governance structures and Directors’ skills), Principles (Responsibility, Accountability, Fairness and Transparency) and Mission (board monitoring and strategic guidance). The survey of 52 Tunisian listed companies revealed that the corporate governance have a positive and partial impact on stakeholder’s satisfaction.
17 Wajdi Ben Rejeb Mohamed Frioui October 20, 2012
An epistemic fault line separating positive from normative concepts underlies theories of corporate governance. I analyze this fault line in order to show the importance of clarifying normative assumptions in governance models. I formulate an impossibility theorem for corporate governance that demonstrates how contemporary theories neglect normative concepts. Applying the theorem clears the way both for the better use of existing models and for the design of more epistemologically sophisticated models.118 Thomas Donaldson April 1, 2012 
This paper examined the effects of corporate governance on the performance of Nigerian banking sector. The secondary source of data was sought from published annual reports of the quoted banks. In examining the level of corporate governance disclosure of the sampled banks, a disclosure index was developed and guided by the Central Bank of Nigeria code of governance. The Person Correlation and the regression analysis were used to find out whether there is a relationship between the corporate governance variables and firms performance. The study revealed that a negative but significant relationship exists between board size and the financial performance of these banks while a positive and significant relationship was also observed between directors’ equity interest, level of corporate governance disclosure index and performance of the sampled banks. The study recommends that efforts to improve corporate governance should focus on the value of the stock ownership of board members and that steps should be taken for mandatory compliance with the code of corporate governance. 119AJALA Oladayo Ayorinde, AMUDA Toyin, ARULOGUN Leye December 2012
this study explores the value implications of good corporate governance for a sample of 54 ADR issuing emerging market firms (EMFs) from 9 countries primarily located in the regions of Asia, Eastern Europe and Latin America and the and employs recently constructed company composite corporate governance metric along with some alternative corporate governance measures associated with the origin of the issuing firm. Although the ADR literature primarily focuses on the impact of subscription to US disclosure requirements we contend that company and country specific corporate governance standards play a significant role in the risk reduction and ensuing value capture.  The fundamental inquiry in this study has the following foci: The primary focus is on the impact of corporate governance structures on firm performance as to whether adherence to standards creates market value for ADR issuing EMFs.  Do good corporate governance practices affect the value of EMFs? The secondary focus is concerned with whether the impact of corruption level and legal system in a firm’s home country affect the corporate structures of EMFs thus affecting the market value of firms.  In this study, we utilize Tobin’s q as the measure of firm performance/market value.  Our findings suggest that there is a significant correlation between corporate governance structures of ADR issuing EMFs and their market values and/or performances.  The results also indicate that the level of corruption and legal structures in home countries of EMFs strongly impact the corporate governance structures of these firms and sequentially affect their market values. Therefore, this research further contributes to the scholarly findings and suppositions that corporate structures of firms do create consequences on firm value . 120Aysun Ficici, C. Bulent Aybar (2012)
This paper presented an account of corporate governance disclosure practices by public enterprises in Swaziland. The study was an attempt to compare the findings to the corporate governance disclosure requirements constructed by the United Nations. Findings revealed that the idea of corporate governance disclosure in general is a relatively new requirement for Swaziland business organizations and, at present, Swaziland does not have a specific framework for corporate governance which can be applicable to all business entities. The study also showed that the most important area regarding corporate governance disclosure was the financial transparency disclosure issues while the least important related to auditing disclosure issues. The study encouraged Swaziland government and companies to focus on improving the governance disclosure levels and develop a common corporate governance framework which will be applicable to all entities in order to enhance good corporate governance practices in the country. But such framework must take the socio-cultural and institutional conditions in Swaziland into account rather than transplanting corporate governance framework from different setting. 21 Kabir Md. Humayun1* and Ismail Adelopo2 , June 2012
 This review surveys the literature on the corporate governance of banks. Traditional corporate governance mechanisms, such as concentrated ownership and takeover threats, in principle, also apply to banks. However, banks have special traits and are heavily regulated, preventing natural forms of governance to arise and rendering many of these governance mechanisms ineffective. Financial regulation can in principle compensate for weaknesses in corporate governance but in practice has had limited effectiveness in protecting the interests of banks’ stakeholders, because of, for instance, unproductive interactions between regulatory restraints and existing governance arrangements. The review concludes with a discussion of corporate governance and regulatory reforms to enhance the safety and soundness of banks. These proposals range from placing more emphasis on value creation for bank stakeholders other than shareholders to reducing risk-shifting incentives for bank managers and shareholders.122 Luc Laeven November 2013
The events of the past 10 years have placed corporate governance under a microscope. Both share-holders and the markets are challenging corporate boards to be accountable-and to carefully follow best practices. The author takes a look at the key trends and challenges facing governance as we move forward. What vital questions must corporate leaders answer? © 2013 Andrew J. Sherman 123Andrew J. Sherman March/April 2013 
This article examines the role of corporate governance instruments in affecting the value of a firm (CGVF) in isolation and in combination of each other in a developed financial market. This article contributes to the literature by performing a comprehensive study by using a correct proxy to value a firm and integrating ASX principles of corporate governance (2003) in the results of the study. Additional tests for robustness are also performed to provide valid results about the CGVF relationship. Furthermore, the implications of various management theories in explaining the relationship of corporate governance instruments (in isolation and in combination) in affecting the value of a firm are also analyzed. The results for the study suggest that a higher use of debt and a bigger board deteriorate shareholders’ value in this market endorsing ASX principles for corporate governance (2003). The results further show that rights of shareholders are protected as the higher liquidity improves the value of a firm. Similarly, market efficiency leads to investors’ confidence that results in a higher performance supporting the essence of ASX principles (2003) in the developed financial market. Finally, tests related to the complementarities of internal corporate governance instruments suggest that board size and CEO duality do not improve the marginal benefits of each other in the developed market. The results provide new insights on the CGVF relationship and are of value to the policy makers and academics in the selected market 124Kashif Rashid,Sardar MN Islam 25 April 2013Corporate Governance has fast emerged as a benchmark for judging corporate excellence in the context of national and international business practices. From guidelines and desirable code of conduct some decade ago, corporate governance is now recognized as a paradigm for improving competitiveness and enhancing efficiency and thus improving investors’ confidence and accessing capital, both domestic as well as foreign. What is important is that corporate governance has become a dynamic concept and not static one. Banks form a crucial link in a country’s financial system and their well-being is imperative for the economy. The significant transformation of the banking industry in India is clearly evident from the changes that have occurred in the financial markets, institutions and products. While deregulation has opened up new vistas for banks to augment revenues, it has entailed greater competition and consequently greater risks. Cross-border flows and the entry of new products have significantly influenced the domestic banking sector, forcing banks to adjust the product mix, as also to effect rapid changes in their processes and operations in order to remain competitive in the globalized environment. These developments have facilitated greater choices for consumers who have become more discerning and demanding compelling banks to offer a broader range of products through diverse distribution channels. In such scenario, implementation of good corporate governance practices in banks can ensure them to cope with the changing environment. Today’s corporate governance means to do everything better and provides for risk assessment, risk cover, early warning systems against failure as well as prompt corrective action. 25 Rajat Deb May 2013 
Corporate governance (CG) has gained substantial ground in developed economies; it has begun to make an impact in emerging markets like India only recently. Several studies, the majority from the developed economies, have examined the relationship between corporate governance mechanisms, ownership structure and firm performance. Those studies yielded different results, affected by the nature of the prevailing economies. Investigating India’s listed firms could enhance the diversity of the growing body of work that examines this relationship. Using listed Indian firms (BSE SENSEX and CNX NIFTY) we study the relationship between ownership structure, corporate governance practices and firm value. In particular we have looked into the nature of relationship between family run companies and firm value. Family based governance system is widely prevalent in the India. While the monitoring hypothesis predicts a positive relation, the entrenchment hypothesis predicts a negative one between insider shareholding and firm value. We study the details of top Indian companies in terms of market confidence and use Return on Asset (ROTA) and Market Capitalisation to Enterprise Value as proxies for Firm Value. We use regression analysis to study the impact of ownership structure and corporate governance practises on firm value. We try to explain the impact of these variables on the valuation of family run companies and analyse how different they are from the non-family run companies. 26 Amitava Roy 11 April, 2014
Building on corporate governance research and institutional theory, this paper explores interrelationships between the firm’s corporate governance, responsible leadership, and corporate social responsibility approaches in different institutional contexts. We present a critique of corporate governance research grounded in agency theory with its focus on corporate social responsibility as mere compliance with rules and regulations. We link different leadership orientations and corporate social responsibility approaches to two key process dimensions of corporate governance related to monitoring and incentives. This analysis builds on previous research that differentiates between governance mechanisms based on strategic as opposed to financial controls and explains how these types of control may be related to responsible managerial behavior and the firm’s corporate social responsibility strategies. Building on governance studies grounded in sociology and organizational theory, we further argue that links between corporate social responsibility strategies and corporate governance factors such as boards of directors, ownership patterns, and executive incentives may differ depending on the legal system and institutional characteristics in a specific country. Our discussion suggests that researchers need to develop a more holistic, institutionally embedded governance framework to analyze organizational approaches to corporate social responsibility.127 Igor Filatotchev1 and Chizu Nakajima2 August 1, 2014 
This study aims to show that the effectiveness of corporate governance in improving firms’ environmental sustainability depends on the national institutional context. Using a sample of 210 firms from 14 countries in North America and Europe, our findings show that regulatory pressures discourage independent directors and separate board chairs to promote environmental sustainability whereas normative pressures have the opposite effect for these two governance mechanisms. We also found a positive moderating effect in relation to cognitive pressures for independent directors. We make a unique contribution to the literature by combining corporate governance and institutional factors to explain firms’ environmental sustainability. Although there is a growing consensus that institutions matter to corporate governance, there has been little research on how environmental institutional pressures may moderate the relationship between corporate governance mechanisms and environmental sustainability. Copyright © 2014 John Wiley & Sons, Ltd and ERP Environment 128Natalia Ortiz-de-Mandojana,Javier Aguilera-Caracuel,Matilde Morales-Raya31 October 2014
This article considers how to assess whether the leadership of a merger and acquisition (M&A) target includes essential human resource from the acquirer’s point of view. After all, M;A should be seen for what it is: a primarily privately controlled reordering of economic, financial, and human resources that occasionally leaves significant disruption in its wake. M;A needs to consider more than accounting and financial issues, thus becoming more professionalized, broader minded, and less exploitative and parochial. 129David M. Shapiro 19 December 2014
We examine institutional investors’ preferences for corporate governance mechanisms. We find little evidence of an association between total institutional ownership and governance mechanisms. However, using revealed preferences, we identify a small group of “governance-sensitive” institutions that exhibit persistent associations between their ownership levels and firms’ governance mechanisms. We also find that firms with a high level of ownership by institutions sensitive to shareholder rights have significant future improvements in shareholder rights, consistent with shareholder activism. Further, we find that factors describing the characteristics of institutions’ portfolios are correlated with governance preferences. Large institutions, those holding a large number of portfolio stocks, and those with preferences for growth firms are more likely to be sensitive to corporate governance mechanisms, suggesting those mechanisms may be a means for decreasing monitoring costs and may be more essential for firms with a high level of growth opportunities. Finally, our results suggest that common proxies for governance sensitivity by investors (e.g., legal type, blockholding) do not cleanly measure governance preferences. 30 Brian J. Bushee2014
Corporate Governance is needed to create a corporate culture of consciousness, transparency and openness. It enables a company to maximize the long term value of the company which is seen in terms of performance of the company. In this paper, we look at various Corporate Governance practices followed by companies in India and South Korea. This includes parameters like Board Constitution, Board Structure, Different Committees, Independent Directors and their roles, Conflict of interest and Disclosure of information. The objective is to determine if there is a relationship between corporate governance and firm performance. The study tries to see whether higher and better corporate governance leads to better performance of the companies. It is found in the study that corporate governance practices have limited impact on both the share prices of the companies as well as on their financial performance 131Pooja Gupta, Aarti Mehta Sharma May 2014
This paper reviews the empirical literature on the corporate governance of banks. We start by highlighting the main differences between banks and nonfinancial firms and focus on three characteristics that make banks special: (i) regulation, (ii) the capital structure of banks, and (iii) the complexity and opacity of their business and structure. Next, we discuss the characteristics of corporate governance in banks and how they differ from the governance of nonfinancial firms. We then review the evidence on three governance mechanisms: (i) boards, (ii) ownership structures, and (iii) executive compensation. Our review suggests that some of the empirical regularities found in the literature on corporate governance of nonfinancial institutions, such as the positive (negative) association between board independence (size) and performance, do not hold for banks. Also, existing work provides no conclusive results regarding the relationship between different governance mechanisms and various measures for banks’ performance. We discuss potential explanations for these mixed results. 132{ Jakob de Haan, Razvan Vlahu  13 January 2015}
Corporate governance is concerned with set of principles, ethics, values, morals, rules regulations, ; procedures etc. Corporate governance establishes a system whereby directors are entrusted with duties and responsibilities in relation to the direction of the company’s affairs. In Bangladesh, corporate Sector is at cross roads as far as legal structure and internal management. It is faced with numerous issues demonstrating the ineffective implementation of laws and code of business ethics. Successful corporate Governance depends to a great extent of trade- off among the various conflicting interest groups like, Government, Society, Investors, Creditors, and Employees of the organization. The basic governance issues related to the effectiveness and accountability of board of directors. This paper lights on the question of transparency and accountability of corporate governance. It identifies the major challenges in this process. The information reveals that the Bangladesh in corporate governance suffers from transparency, independence in decision making. The paper concludes with some strategies, which are considered essential for the exercise of good governance in Bangladesh. 133Dr. Md. Abdur Rouf  HYPERLINK “” o “View other papers by this author” “_blank” M. Abdullah-Al Harun 2015}

Corporate governance has become an important topic in transition economies in recent years. Directors, owners and corporate managers have started to realize that there are benefits that can accrue from having a good corporate governance structure. Good corporate governance helps to increase share price and makes it easier to obtain capital. International investors are hesitant to lend money or buy shares in a corporation that does not subscribe to good corporate governance principles. Transparency, independent directors and a separate audit committee are especially important. Some international investors will not seriously consider investing in accompany that does not have these things. Several organizations have popped up in recent years to help adopt and implement good corporate governance principles. This Research paper begins with an overview of some basic corporate governance mechanism the regulation and enforcement relies on the development of an inter-related web of public and private institutions, regulations and rights that underpin the four basic values of corporate governance – transparency, accountability, fairness, and responsibility. Without the guarantee of these institutions, the market-building benefits of good internal corporate governance become tenuous. However, if functioning well, their benefits have far-reaching impact, increasing investor confidence and providing business the legal basis needed to take risk and to grow. 34M. Nazmul Islam 2015}
The purpose of this paper is to verify the presence and intensity (extent) of the relationship between corporate governance and performance in Italian listed companies by using both accounting and non-accounting performance measures. We extended previous literature in considering all the main aspects of governance (board structure and ownership structure) and all relevant peculiarities of Italian entrepreneurial system (family business, concentrated ownership, State ownership, pyramidal groups). In the first part of the paper, we used regression analysis on a sample of 182 Italian listed companies to find that firm performance was positively related to board size and audit committee’s effort and negatively related to leverage, although with a very low coefficient. No particular relationship was highlighted for ownership structure. We tested the consistency of this finding by doing a follow-up analysis between a sub-group of 134 of 2003 sample companies and the same companies in 2007 to verify the stability of the determinants of performance and their relative impact overtime. What we found was that only board size kept its positive relation with performance. Audit committee and leverage lost their relevance in 2007 sample in which the presence of a compensation committee showed a positive impact on performance. From our findings, we can conclude that, according to other studies (Belcredi ; Rigamonti 1), the relationship among ownership and corporate governance structure and firm performance is ambiguous. The ambiguity improves if considering the relationship overtime. 135Fabrizio Fratini1, Patrizia Tettamanzi
Failures of banks’ governance and risk management functions have been identified as key causes of the 2007–2008 financial crisis. This article reviews the empirical literature that investigates the relationship between governance structures and risk management functions as well as their impact on banks’ risk taking and performance. I first discuss risk management’s responsibilities and relevance for a value-maximizing bank. The business nature of financial institutions and their funding structure, together with explicit and implicit government guarantees, set them apart from nonfinancial firms. I argue that conventional governance structures alone may be unable to restrain risk taking in banks and thus the presence of a strong and independent risk management function becomes necessary to monitor and control enterprise-wide risk exposures. Recent evidence shows that a strong risk management function, compatible with the appropriate business model and culture, can restrain tail risk exposures at financial institutions and promote long-term value maximization. 36 Andrew Ellul December 2015
The effect of corporate governance may depend on a firm’s financial slack. On one hand, financial slack may be spent by managers for their private benefits; a high level is likely associated with severe agency conflicts. Thus corporate governance matters more for high financial slack firms (i.e., the wasteful spending hypothesis). On the other hand, financial slack provides insurance against future uncertainties; a low level may signal deviations from the best interests of shareholders. Then corporate governance is more effective for low financial slack firms (i.e., the precautionary needs hypothesis). We differentiate the two hypotheses using the passage of antitakeover laws to identify exogenous variation in governance. Consistent with the wasteful spending hypothesis, the laws’ passage has a larger negative impact on the operating and stock market performance of high financial slack firms. Further analysis shows that these firms do not invest more but become less efficient at cost management after the laws’ passage137Kose John, Yuanzhi Li, Jiaren Pang,2015
A code of corporate governance was introduced in Sweden in 2005. Although the code is mandatory, a company is allowed to override specific rules if it openly discloses the deviation and explains why it does not comply. The aim of this study is to explain how the governance structure, operationalized as the ownership structure, the board and the auditor, affects companies’ propensity to deviate from the Swedish Code. The empirical data in this study are based on the 2010 annual reports from 193 companies listed on the Stockholm Stock Exchange and data from the Swedish Corporate Governance Board. The findings show that concentrated ownership, smaller boards with directors with long tenure and audit firms with a high proportion of employees compared with partners increase the likelihood of deviance. 138Torbjörn Tagesson, Sven-Olof Yrjö Collin 22 October 2015
This paper investigates the corporate governance voluntary and non-voluntary disclosure practices of the listed companies from four European emerging countries, namely Estonia, Poland, Hungary and Romania. The study also identifies how compliant are the companies from these countries with their national corporate governance recommendations, including the compulsory corporate governance information, but also how willing they are to disclose voluntary corporate governance information. Finally, the paper aims to analyse the factors that influence companies from these countries to disclose certain types of information, trying to discover whether the companies’ corporate governance systems are mostly influenced by their national business or legal environment or if there are more powerful internal factors which influence the enforcement of certain corporate governance practices. 39Ruxandra-Adriana Mateescu 2015}
The board of directors performs a very important role in formulating and monitoring the strategy of a company. Recent development in technology and the change in business environment as well as change in the nature of demand by customers has necessitated the change in the products and services offered by finance companies. Based on data from finance companies listed on Bursa Malaysia over the period 2007 to 2011 this paper examined the impact of board attributes and ownership structure on the corporate strategy of finance companies in Malaysia. The result indicates that expertise of directors and past performance is significant and negatively related with diversification. The study contributes to the literature on corporate governance of finance companies in relation to their diversification strategy and has highlighted the corporate governance mechanisms and regulatory measures appropriate for the sector in order to enhance monitoring so as to achieve sustainable economic development. 140Basiru Salisu KALLAMUVol 3, No 1 (2016).

We develop the concept of corporate governance deviance and seek to understand why, when, and how a firm adopts governance practices that do not conform to the dominant governance logic. Drawing on institutional theory, coupled with the entrepreneurship and corporate governance literatures, we advance a middle range theory of the antecedents of corporate governance deviance that considers both the institutional context and firm-level agency. Specifically, we highlight the centrality of a firm’s entrepreneurial identity as it interacts with the national governance logic to jointly create corporate governance discretion (i.e., the latitude of accessible governance practices) within the firm. We argue that as a firm’s governance discretion increases, it will be more likely to adopt over- or under-conforming governance practices that deviate from established norms and practices. Moreover, we propose that adopting a deviant corporate governance practice is contingent on the governance regulatory environment and a firm’s corporate governance capacity. We conclude by advancing a new typology of corporate governance deviance based on a firm’s over- or under-conformity with the dominant national logic, as well as its entrepreneurial identity motives. This globally-relevant study refines and extends comparative corporate governance research and enriches our current understanding of the institutional logics perspective141Ruth Aguilera?, William Judge and Siri Terjesen June 30, 2016.

Corporate governance is an issue of considerable importance in emerging economies yet it has mainly been studied in Anglo-American contexts. New perspectives are required to meet the unique governance issues faced in developing regions of the world. This chapter explores the evolution of corporate governance in India. The social, cultural, economic and regulatory dynamics that gave rise to the corporate governance changes in India will be explored using a New Institutional Economics perspective. The chapter then proposes that Ghandism, a holistic value system based on truth, compassion and integrity, may provide for forms of corporate governance practice which are more contextually relevant to India. The chapter will conclude by furnishing a case study of one of India’s largest corporate scandals the country has faced (Satyam’s collapse) and a discussion of how Ghandism may infuse values to mitigate future governance failures. 42 HYPERLINK “” o “View other papers by this author” “_blank” Mia Mahmudur Rahim Sanjaya Kuruppu April 21, 2016

Corporate governance is of growing importance in Australia, New Zealand and all over the world. Corporate governance interacts with auditing and it is useful to understand how corporate governance and auditing affect companies. However, the interaction is not straight forward. To some extent, good auditing will lead to recommendations that will lead to improved governance; while on the other hand, good governance will lead to directors setting high standards including demanding a high standard of auditing. A related issue is whether better governance is a substitute for auditing or a complement. Previous studies of that issue have had mixed results. This review article provides a synthesis of Australian and New Zealand research about corporate governance and auditing that takes stock of what has been found and examines issues that can be explored using multiple studies. We conclude that despite extensive research, there is still considerable uncertainty about the effects of corporate governance mechanisms on auditing and the effects of auditing on corporate governance. The results are intended to be helpful in providing advice about policy in Australia and New Zealand, and in determining directions for new research.143 David Hay, Jenny Stewart, Nives Botica Redmayne September 13, 2016   
Objectives: The purposefulness of the paper is to examine the significance of independence in corporate governance, issues and challenges that independent directors have to face and the importance of culture and communication. Analysis and Findings: The paper investigates how a firm’s governance maps between corporate governance and independent directors. Corporate Governance is a fundamental significance to an establishment as it undoubtedly augments a company’s image in the public. It is about establishing values and principles into every aspect of business. It acts as a pillar for the reliability and stability of any establishment. When performed successfully, it can prevent corporate humiliations, counterfeit, civil and criminal liabilities of the company. The importance of independence in corporate governance is vital and an essential component for efficiency. However, corporate governance structures differ from country to country and thus largely influenced by culture. Communication between management, independent directors, stakeholders, shareholders and customers who do not share a common language or culture can always become a concern. Further independent directors are perceived as the key boundary between management, then, they are understood as the marginal shareholders or stakeholders. Needless to state, to improve corporate governance independent directors with excellent business tactics, dedication, cultural tolerance and positive attitude are essential since this helps remarkably in the growth of a company. However, to achieve an effective role in protecting the company’s objective in terms of sustainable grow this a remarkable challenge. This is because of strong review from stakeholders, substantial demands imposed and an increase in overall difficulty of the business setting and cultural exchanges. The high competency of independent directors and understanding the cultural aspects of the country by management would make corporate governance a great success. If an implementation of effective corporate governance joined with communication and diversity awareness, the revenue and market share improves along with enhancing image of the business.
44B. Nalina 1*, N. Panchanatham 2 September 2016
Ever since ownership and management were separated, corporate governance emerged as an essential institution of market economy. Based on this statement, several corporate governance mechanisms have been extensively researched. Developed and transition countries, according to the differences that determine the corporate governance model, which refer to the historical and cultural heritage of countries, socio-economic conditions, legal/institutional framework and ownership structure, apply various corporate control mechanisms. Since market institutions are missing in transition countries, and institutional framework is insufficiently developed, these countries must develop appropriate corporate governance model, as well as corporate governance mechanisms. Due to these mentioned features, the research topic is to analyze effectiveness of corporate governance mechanisms in selected transition countries with common socio-economic environment. Special attention is given to the problems of corporate governance mechanisms improvement and possibilities of overcoming them. 145Verica M. Babi?, Jelena D. Nikoli?, Milena S. Stanisavljevi? 2016
This study examines the extent to which corporate governance acts as an efficient means of protecting investors against accounting irregularities. It is grounded in the literatures on public enforcement of securities laws by market authorities, governance, and fraudulent financial statements. A unique feature of the Canadian tracking and enforcement system for reporting issuers in default is used to refine the definitions of accounting irregularities or fraudulent financial statements used in other studies. We test and find that the governance mechanisms of firms found in default of financial reporting regulations during the first 5 years of existence of the Canadian system are weak compared to a sample of no-default firms. For instance, they have fewer independent and financial expert directors on their boards and audit committees, are more prone to have recently changed auditor and to having their CEO as chair of the board. They also appear to fulfill their financing requirements through private rather than public funds, which is consistent with the fact that default firms are less likely to be in a position to return to the public market to fulfill their needs. This study offers evidence relevant to policy makers and others who are concerned with the potential role of market authorities and governance in protecting investors against accounting irregularities. 46Nadia Smaili and Réal Labelle 2016
Using a unique dataset of corporate bond trading information and corporate governance evaluation scores, this study examines the determinants of corporate bond market liquidity in Korea. In particular, this study explores whether corporate governance performance of a company influences liquidity of bonds issued by the company. The paper reports three important findings. First, the issue size and age of bond are important determinants of bond liquidity. Second, liquidity of corporate bonds is influenced by changes in macroeconomic conditions. Third, and most importantly, better corporate governance increases liquidity of corporate bonds. This result suggests that corporate governance is an important determinant of bond liquidity, as it lowers transaction costs by improving transparency and reducing asymmetry of information. This paper contributes to the literature by providing new evidence that corporate governance performance is an important determinant of liquidity in corporate bond markets. 147Hyun Jin Lee & Insook Cho 28 Jan 2016
Auditing develops within a social context. On the basis of Parsons’ social action theory, we examine whether auditors’ attitude toward marketing activities influences the time balance between auditing and marketing activities and attitude toward the importance of corporate governance mechanisms. We use survey responses from 257 auditors in Iran. We conducted our analysis by applying a binary Probit regression and for additional analysis, we utilize neural networks. Attitude toward marketing has a positive significant relationship with balance time between auditing and marketing activities. And the attitude of auditors toward marketing has a positive significant relationship with attitude toward corporate governance. Also, the results showed a significant difference between industry expert auditors’ attitude and other auditors toward marketing activities. Finally the results of this paper generally suggest that if artificial neural networks are employed in the prediction process, more reliable results will be achieved. The paper provides important insights into emerging issues and developments in auditing and marketing that have clear relevance to auditing research and practice. Drawing on our analytical framework, weprovide directions for further opportunities for research of social theories and auditing.48 Mahdavi and Daryaei 2016
The aim of the paper is to propose a model for measuring sustainable value which would complexly assess environmental, social, and corporate governance contribution to value creation. In the paper the concept of the Sustainable Environmental, Social and Corporate Governance Value Added is presented. The Sustainable Environmental, Social and Corporate Governance Value Added is based on the Sustainable Value Added model and combines weighted environmental, social, and corporate governance indicators with their benchmarks determined by Data Envelopment Analysis. Benchmark values of indicators were set for each company separately and determine the optimal combination of environmental, social, and corporate governance inputs to economic outcomes. The Sustainable Environmental, Social and Corporate Governance Value Added methodology is applied on real-life corporate data and presented through a case study. The value added of most of the selected companies was negative, even though economic indicators of all of them are positive. The Sustainable Environmental, Social and Corporate Governance Value Added is intended to help owners, investors, and other stakeholders in their decision-making and sustainability assessment. The use of environmental, social, and corporate governance factors helps identify the company’s strengths and weaknesses, and provides a more sophisticated insight into it than the one-dimensional methods based on economic performance alone. 
149Alena Kocmanová ,Marie Pavláková Do?ekalová  ,Stanislav Škapa andLenka Smolíková 2016
2.4 Conclusion
This chapter reviewed the literature in relation to corporate governance practices in both India and Abroad countries. Research shows that the mission of most organizations is to resolve the collective action problems among dispersed investors and the reconciliation of conflicts of interest between various corporate claimholders (Marco Becht, Patrick Bolton, Ailsa Röell , 2002).

The literature also recognized that the Policymakers in several countries gave much importance to independent directors, as an important element of legal and policy reforms in the field of corporate governance (Donald C. Clarke 2006)
Prior research also reported that there is a significant impact of government ownership on company performance after controlling of company specific characteristics such as company size, non-duality, leverage and growth. It is very significant for investors and policy markers which will serve as a guiding for better investment decisions. (Rubi Ahmad, Huson Joher Aliahmed ,Nazrul Hisyam Ab Razak Sr.2008)
The literature identified that corporate governance practices in India and abroad countries are comparatively different and the vastness of the existing Corporate Governance literature there a need for future research.
This chapter also reviewed the theories that are relevant to corporate governance practices in this study. This literature review will be used to design the conceptual framework to develop the relevant hypotheses in this study.


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