National Governance System, Corporate Ownership, and Roles of Outside Directors: A Corporate Governance Bundle Perspective

14 Pages Posted: 30 Apr 2014

See all articles by Toru Yoshikawa

Toru Yoshikawa

Singapore Management University - Lee Kong Chian School of Business

Hongjin Zhu

McMaster University

Pengji Wang

National University of Singapore (NUS)

Date Written: May 2014

Abstract

Manuscript Type. Conceptual. Research Questions/Issues. We explore why and how the different combinations of governance practices at national level, such as the legal system, conduct codes, and capital markets, and at firm level, such as various types of controlling shareholders, enable or constrain outside directors to engage in their monitoring and resource provision roles. Building upon such analysis, we develop a new taxonomy of corporate governance systems according to the different configurations of a set of interdependent governance characteristics, including national governance mechanisms, identity of block shareholders, and functions of outside directors. Research Insights. This study enriches the growing body of research on governance complementarity and substitution by highlighting the role of bundles of governance practices in influencing directors' engagement in governance behavior, and consequently advancing our understanding of variation in corporate governance systems across and within countries. Theoretical/Academic Implications. This paper demonstrates that the roles of outside directors depend on the interaction between a bundle of governance mechanisms rather than any individual mechanisms. The paper also goes beyond the traditional governance models based on the national context and highlights that interdependencies of corporate governance practices play an important role in explaining the diversity and variation of corporate governance arrangements across firms in both industrialized economies and emerging markets. Practitioner/Policy Implications. This paper provides insights to policymakers by suggesting that not all the governance bundles are conducive to managerial monitoring and resource provision by outside directors.

Keywords: Corporate Governance, Board of Directors, Ownership Mechanisms, Agency Theory, Resource Dependence Theory

Suggested Citation

Yoshikawa, Toru and Zhu, Hongjin and Wang, Pengji, National Governance System, Corporate Ownership, and Roles of Outside Directors: A Corporate Governance Bundle Perspective (May 2014). Corporate Governance: An International Review, Vol. 22, Issue 3, pp. 252-265, 2014, Available at SSRN: https://ssrn.com/abstract=2431034 or http://dx.doi.org/10.1111/corg.12050

Toru Yoshikawa

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

Hongjin Zhu

McMaster University ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada

Pengji Wang

National University of Singapore (NUS) ( email )

1E Kent Ridge Road
NUHS Tower Block Level 7
Singapore, 119228
Singapore

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