The two sides of the governance coin: competition and regulation

Krishnamurti, Chandrasekhar (2010) The two sides of the governance coin: competition and regulation. In: Corporate governance: an emerging scenario. National Stock Exchange of India Limited, India, pp. 35-59.

Abstract

We draw upon multiple theories of corporate governance to examine the effects of competition and regulation on firm-level corporate governance quality. We find that regulation enhances firm-level corporate governance and within-country convergence. Competition has a negative effect on corporate governance. The interactive effect of regulation and competition is negative on firm-level corporate governance. Furthermore, competition reduces within-country convergence. Internal, i.e., firm-level governance choices are significantly influenced by external (country-level) choices. This suggests that governance choices are likely to converge across countries while simultaneously diverging within countries. For example, while firms in the top governance score cluster of each country will be different from lower-scoring clusters of firms in the same country, the similarity of the competition-regulation environment in which they operate means that these firms are likely to be very similar to firms in the top governance clusters of other countries. Our paper makes two significant contributions. First, it provides an integrative view of corporate governance that incorporates factors contributing to the variation in corporate governance across countries. Second, we contribute to the debate on within- and crosscountry convergence of corporate governance. While some researchers pontificate on the eventual convergence of global corporate governance practices, others have their own doubts. The latter viewpoint is reinforced by studies on temporal convergence in corporate governance which reveal significant cross-country variation due to path-dependence in the evolution of corporate governance practices. We provide an economic argument, namely that competition detracts from within-country convergence in corporate governance.


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Item Type: Book Chapter (Commonwealth Reporting Category B)
Refereed: Yes
Item Status: Live Archive
Additional Information: Copyright National Stock Exchange of India Limited. Print copy not held in the USQ Library.
Depositing User: Professor Chandrasekhar Krishnamurti
Faculty / Department / School: Historic - Faculty of Business - School of Accounting, Economics and Finance
Date Deposited: 28 Mar 2011 06:23
Last Modified: 03 Jul 2013 00:32
Uncontrolled Keywords: corporate governance; competition; firms
Fields of Research (FOR2008): 18 Law and Legal Studies > 1801 Law > 180109 Corporations and Associations Law
22 Philosophy and Religious Studies > 2201 Applied Ethics > 220102 Business Ethics
15 Commerce, Management, Tourism and Services > 1503 Business and Management > 150303 Corporate Governance and Stakeholder Engagement
Socio-Economic Objective (SEO2008): E Expanding Knowledge > 97 Expanding Knowledge > 970115 Expanding Knowledge in Commerce, Management, Tourism and Services
URI: http://eprints.usq.edu.au/id/eprint/18565

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