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Book part
Publication date: 1 January 2008

Hakim Ben Othman and Daniel Zeghal

Purpose – This study examines country-level attributes that impact on Corporate Governance Disclosure (CGD) depending on the emerging market country's legal system.…

Abstract

Purpose – This study examines country-level attributes that impact on Corporate Governance Disclosure (CGD) depending on the emerging market country's legal system.

Methodology/approach – We evaluate CGD level using 749 annual reports (year ended 2006) in 57 emerging market countries. We develop a CGD determinants model that compares differences in country level attributes between common law and civil law emerging market countries. Our model builds on a multiple regression and assumes interaction between the origin of the legal system and country-specific attributes.

Findings – Common law emerging markets have substantially higher levels of CGD than civil law ones. CGD is positively associated with the size of the capital market for the entire sample of emerging markets and for the sub-samples of common law and civil law countries. Law enforcement also has a strong positive influence on CGD in common law emerging countries, whereas it has no influence on CGD in civil law emerging countries.

Practical implications – Providing CGD levels for emerging markets helps to a better understanding of the corporate governance characteristics that prevail in each country. Decision makers (international investors, market authorities, standard setters, etc.) should be aware of how country level attributes may interact with the legal system (common law or civil law) to influence CGD.

Originality of the paper – This is one of the few papers to present evidence of the impact of country level attributes on CGD. This study contributes to identifying the attributes that influence CGD with reference to common law and civil law emerging markets.

Details

Corporate Governance in Less Developed and Emerging Economies
Type: Book
ISBN: 978-1-84855-252-4

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Article
Publication date: 22 June 2020

Ranjan Das Gupta and Rajesh Pathak

The study examines the role of a country's legal system in predicting the corporate cash holdings using a sample of 18 countries inherited with distinct legal traditions…

Abstract

Purpose

The study examines the role of a country's legal system in predicting the corporate cash holdings using a sample of 18 countries inherited with distinct legal traditions. The central point of the study is the comparative assessment of legal frameworks in shaping the corporate finance policies.

Design/methodology/approach

The authors employ host of regression techniques including dummy variables, panel data regression and Fama–MacBeth regressions to establish the relationship.

Findings

The study results support the idea of “theory of law and finance” that legal tradition is a key factor determining corporate behaviour and policy. In particular, the authors observe that firms operating in civil law systems hold significantly higher cash as compared to their peers from common law systems. Moreover, the authors report that the law system affects the corporate cash holdings through the channels of economic development and shareholder's protection, yet in opposite directions. This is because the authors find that in developed countries where civil law tradition prevails, firms hold reasonably higher cash. Moreover, if the firm belongs to high investors' protection country with civil law traditions, the cash holdings get substantially reduced. Besides, the authors find that the predictability of widely held determinants of cash holdings is not invariant of law traditions, and it holds true also when analysed in conjunction with the financial crisis. Overall, the authors find support for their postulation that corporate cash management policies are likely to be different across legal traditions. The study results are robust to the controls for various firm and country-specific antecedents of cash holdings and to the alternate econometric techniques.

Practical implications

The study findings would encourage the government and firm policymakers and regulators in strengthening the investor protection rights which would further augment the legal system and firm-specific corporate governance mechanisms. This would mitigate agency issues and managers would be forced to undertake investor-friendly financial policies especially corporate cash holdings which would be resulting into shareholder value maximization.

Originality/value

The study contributes uniquely since the existing literature is largely silent on the role that legal tradition of a country has on the cash holdings of its firms.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

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Article
Publication date: 12 July 2011

Rachelle Alterman

This paper aims to present the merits of cross‐national comparative research as a method for pushing the frontier of knowledge about planning laws. Since in every country

Abstract

Purpose

This paper aims to present the merits of cross‐national comparative research as a method for pushing the frontier of knowledge about planning laws. Since in every country there is usually some dissatisfaction with its present planning laws or certain aspects of them, cross‐national research can open an arena of alternatives based on real‐life experiences. To demonstrate this argument the paper focuses on a shared dilemma – how should the law handle the negative effects of some planning decisions on land values. This case is used to demonstrate both the comparative method and the usefulness of comparative findings. The conclusions point out the opportunities for cross‐learning.

Design/methodology/approach

The overall argument about the comparative research draws on the author's extensive experience in conducting cross‐national research on a variety of issues in planning laws. The research on compensation rights reported here draws on the author's recent book which analyses the laws and practices in 13 countries. To ensure a “common platform” for comparison, the author developed a method based on a set of factual scenarios and a shared framework of topics. A team of country‐based researchers conducted the legal analysis, and the team leader conducted the comparative analysis.

Findings

The 13‐country analysis shows that there is a great variety of approaches to compensation rights around the world and a broad range of degrees, from no compensation at all to extensive compensation rights. There is no “consensual approach”. The search for similarities based on region in the world, legal family, cultural background, density or demography, shows that the differences cannot be “explained” on the basis of these variables. The degree of political controversy on this issue also varies greatly. The breadth of laws and practices offer a range of alternative models to enrich local debates.

Research limitations/implications

Any comparative research on a new topic is bound to be exploratory. There are not yet any established theories in planning law (or in comparative research) from which hypotheses can be derived and tested. However, the large sample of countries, covering 40 per cent of the OECD countries (at the time), and the careful shared method have likely produced reliable findings.

Originality/value

Most of the comparative research that the author has conducted over the years charted new grounds in both its topics and its comparative breadth. The paper reports in brief on cross‐national comparative research on compensation rights. The full research, on which this paper draws (published as a book in 2010), is the first to look at this specific issue globally with a large 13‐country sample of OECD countries.

Details

International Journal of Law in the Built Environment, vol. 3 no. 2
Type: Research Article
ISSN: 1756-1450

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Article
Publication date: 1 March 2021

Chun-Teck Lye and Chee-Wooi Hooy

This study aims to examine the effects of investor protection (PROT), internal and external corporate governance (CG) on private information-based trading (PIBT).

Abstract

Purpose

This study aims to examine the effects of investor protection (PROT), internal and external corporate governance (CG) on private information-based trading (PIBT).

Design/methodology/approach

This study uses a sample of 3,438 firms from 42 countries for the period 2002–2015 to examine the effects of the broad and specific measures of PROT, internal CG and external CG (product market competition and block ownership [BOWN]) on a more accurate measure of PIBT using regression analysis.

Findings

The results show that PROT and BOWN are effective in reducing PIBT. However, the specific measure of PROT (strength of PROT) is not significant in emerging markets and civil law countries. The internal CG is also significant but has a positive effect on PIBT.

Research limitations/implications

The results suggest that PROT law matters in the efforts to prevent PIBT. Policymakers and securities market regulators, particularly in emerging markets and civil law countries, should focus more on refining existing securities laws and enacting detailed securities rules that explicitly prevent specific market manipulation and PIBT.

Originality/value

This study provides evidence for the importance of specific and detailed securities rules in different market and legal environments. Furthermore, this study uses the segregated private information-based speculative trading component to accurately measure the PIBT.

Details

Studies in Economics and Finance, vol. 38 no. 4
Type: Research Article
ISSN: 1086-7376

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Book part
Publication date: 30 March 2017

Marc Steffen Rapp and Oliver Trinchera

In this paper, we explore an extensive panel data set covering more than 4,000 listed firms in 16 European countries to study the effects of shareholder protection on…

Abstract

In this paper, we explore an extensive panel data set covering more than 4,000 listed firms in 16 European countries to study the effects of shareholder protection on ownership structure and firm performance. We document a negative firm-level correlation between shareholder protection and ownership concentration. Differentiating between shareholder types, we find that this pattern is mainly driven by strategic investors. In contrast, we find a positive correlation between shareholder protection and block ownership of institutional investors, in particular when we restrict the analysis to independent institutional investors. Finally, we find that independent institutional investors are positively associated with firm valuation as measured by Tobin’s Q. The opposite applies for strategic investors. Overall, our results are consistent with the view that (i) high shareholder protection and (ii) limited ownership by strategic investors make small investors and investors interested in security returns more confident in their investments.

Details

Global Corporate Governance
Type: Book
ISBN: 978-1-78635-165-4

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Article
Publication date: 1 April 2004

Georgios I. Zekos

Investigates the differences in protocols between arbitral tribunals and courts, with particular emphasis on US, Greek and English law. Gives examples of each country and…

Abstract

Investigates the differences in protocols between arbitral tribunals and courts, with particular emphasis on US, Greek and English law. Gives examples of each country and its way of using the law in specific circumstances, and shows the variations therein. Sums up that arbitration is much the better way to gok as it avoids delays and expenses, plus the vexation/frustration of normal litigation. Concludes that the US and Greek constitutions and common law tradition in England appear to allow involved parties to choose their own judge, who can thus be an arbitrator. Discusses e‐commerce and speculates on this for the future.

Details

Managerial Law, vol. 46 no. 2/3
Type: Research Article
ISSN: 0309-0558

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Article
Publication date: 10 July 2017

Sheela Sundarasen, Sanjay Goel and Fairuz Ahmad Zulaini

Managers may underprice initial public offerings (IPOs), leading to higher initial returns (IRs). The purpose of this paper is multi-fold: to compensate investors for…

Abstract

Purpose

Managers may underprice initial public offerings (IPOs), leading to higher initial returns (IRs). The purpose of this paper is multi-fold: to compensate investors for risk, to reduce litigation risk, as well as to maintain control over the firm. The authors examine country-level contingencies (degree of investor protection, legal origin and degree of transparency) in OECD countries to explain IPO IRs.

Design/methodology/approach

Cross-sectional data comprising of 4,164 IPOs from 28 OECD countries are used for the period of 2005-2010. Ordinary least square using multiple linear regressions is used to test the hypotheses.

Findings

Investors’ protection is associated with higher IRs. This relationship is stronger in the non-common law countries. Degree of transparency negatively moderates the relationship in common law countries. Overall, the results show evidence of risk compensation, litigation risk reduction, and managerial control motives in underpricing.

Originality/value

IPO IRs in OECD countries is examined, within the boundaries of institutional characteristics, i.e., investors’ protection, legal origin and transparency level.

Details

Managerial Finance, vol. 43 no. 7
Type: Research Article
ISSN: 0307-4358

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Content available
Article
Publication date: 18 March 2019

Sheela Devi D. Sundarasen

This paper aims to provide empirical evidence on the extent of alteration institutional characteristics, i.e. legal origin and corruption levels, may have on the signaling…

Abstract

Purpose

This paper aims to provide empirical evidence on the extent of alteration institutional characteristics, i.e. legal origin and corruption levels, may have on the signaling effects of auditors’ reputation, underwriters’ reputation and ownership retention on initial public offering (IPO) initial returns in OECD countries.

Design/methodology/approach

Cross-sectional data composed of 6,182 IPOs from 30 OECD countries are used for 2003-2012. Ordinary least square with multiple linear regressions is used to test the hypotheses.

Findings

The findings indicate that the legal framework and corruption level of a country alters the signaling effects of underwriters’ reputation, auditors’ reputation and ownership retention in an IPO environment. These three variables mitigate information asymmetry, signal firm value to potential investors and ultimately decrease IPO initial returns. This relationship is more significant in the civil law countries. Corruption levels negatively moderate the relationship in the common law and Scandinavian civil law countries but have no significance in the German and French civil law countries, indicating the importance of the signaling variables in these two civil law countries.

Originality/value

This study examines the extent of the alterations that the legal framework and the corruption levels cause to the signaling relationship between auditors’ reputation, underwriters’ reputation and ownership retention on IPO initial returns in selected OECD countries.

Details

PSU Research Review, vol. 3 no. 1
Type: Research Article
ISSN: 2399-1747

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Article
Publication date: 12 November 2018

Hong Cheng, Gabriela Flores, Satvir Singh and Richard Posthuma

This paper aims to examine whether the number of employment discrimination laws in a country influences voice and accountability.

Abstract

Purpose

This paper aims to examine whether the number of employment discrimination laws in a country influences voice and accountability.

Design/methodology/approach

The authors compared the number of employment discrimination laws in different countries to perceptions of voice and accountability.

Findings

Results indicate that the number of discrimination laws enacted in a country has a positive impact on the voice and accountability perceptions of citizens. Further, this relationship is found to be moderated by two contextual factors: cultural assertiveness and the percentage of females in the population. Specifically, the positive impact of the number of discrimination laws on voice and accountability perceptions was found to be stronger in highly assertive cultures and in countries with a lower percentage of females in the population.

Originality/value

This is the first study to show a relationship between the number of employment discrimination laws in a country and perceptions of voice and accountability.

Details

International Journal of Law and Management, vol. 60 no. 6
Type: Research Article
ISSN: 1754-243X

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Article
Publication date: 22 March 2019

Tanja Steigner, Marian K. Riedy and Antonina Bauman

The purpose of this paper is to investigate the interaction between legal origin and cultural distance and its impact on foreign direct investment (FDI) flows into the OECD.

Abstract

Purpose

The purpose of this paper is to investigate the interaction between legal origin and cultural distance and its impact on foreign direct investment (FDI) flows into the OECD.

Design/methodology/approach

Ordinary least squares regression analysis is used to evaluate FDI flows into OECD countries between 2003 and 2012. Estimations use fixed effects and clustered standard errors.

Findings

FDI flows from civil to common law countries are greater than vice versa. Further, cultural distance impacts FDI flows depending on the legal origin of the source country. Specifically, more FDI flows from civil and common law countries, when the host country has a higher (lower) power distance (individualism) score. Civil law countries send more FDI into countries with higher masculinity, uncertainty avoidance and indulgence scores and with lower long-term orientation scores. The opposite is the case with common law source countries. The findings remain robust for various changes to the sample selection.

Research limitations/implications

The concepts of cultural distance and legal origin have been criticized. However, neither concept has been rejected; rather, both concepts persist as robust empirical research tools.

Practical implications

Scholars, managers and investors can gauge the impact of cultural distance on FDI flows based on the legal family of the source country. Further, policy makers might want to consider rebranding their countries in terms of cultural perceptions to show the attractiveness of specific cultural dimensions to foreign companies and investors.

Originality/value

To the best of the authors’ knowledge, this is the first paper that jointly investigates FDI, legal origin and national culture.

Details

International Journal of Managerial Finance, vol. 15 no. 3
Type: Research Article
ISSN: 1743-9132

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