Overseas compliance risk prevention for multinational corporations in a law and economics perspective: empirical evidence from Chinese MNCs
ISSN: 1525-383X
Article publication date: 10 January 2023
Issue publication date: 20 March 2023
Abstract
Purpose
This paper aims to investigate whether executive compensation and internal control can prevent overseas compliance risks through the mediating influence of multinational corporation (MNC) legitimacy and the moderating role of institutional distance.
Design/methodology/approach
Based on a law and economics perspective and the “bad apple,” the “red barrel” and the “bad cellar” theory of business misconduct, this paper constructs a systematic framework of “compliance motivation MNC legitimacy overseas compliance risk prevention” from the individual, organizational and systematic levels and uses data of Chinese MNCs for empirical analysis.
Findings
Empirical data from Chinese MNCs show that overseas compliance risks are comprehensively affected by the factors of the individual, organizational and systematic levels. Higher executive compensation and internal control will reduce MNCs’ overseas compliance risks through MNC legitimacy acquisition; institutional distance hinders the positive effect of internal control on MNC legitimacy and therefore aggravates overseas compliance risks.
Practical implications
This paper contributes to the understanding of the overseas law-abiding and offence behavior of MNCs from a law and economics perspective and offers valuable insights on how to prevent the ever-increasing overseas compliance risks.
Originality/value
Although the literature has analyzed the factors of compliance behavior, they are not interrelated, let alone integrated in a systematic risk prevention framework. This paper applies a law and economic analysis framework to the study of the overseas compliance risks for the first time.
Keywords
Acknowledgements
This work was supported by National Natural Science Foundation of China [grant number 71973127] Coevolution of innovation-oriented overseas merger and acquisition (M&A) integration and knowledge network reconfiguration: a multinational knowledge flow perspective; Major Program of the National Social Science Foundation of China[grant number 19VDL018] “Going Global” enterprises’ overseas compliance risk prevention guidelines and detailed rules; National Natural Science Foundation of China [grant number 71673248]; Key projects of the Natural Science Foundation of Zhejiang Province [grant number LZ20G020001]; Key Projects of Zhejiang Province Philosophy and Social Sciences Superiority Discipline [grant number 20YSXK01ZD]; the Fundamental Research Funds for the Central Universities, 2022.
Citation
Chen, F., Zhu, J. and Wang, W. (2023), "Overseas compliance risk prevention for multinational corporations in a law and economics perspective: empirical evidence from Chinese MNCs", Multinational Business Review, Vol. 31 No. 1, pp. 136-156. https://doi.org/10.1108/MBR-07-2022-0095
Publisher
:Emerald Publishing Limited
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