Global Differences in Corporate Governance Systems - Theory and Implications for Reforms

68 Pages Posted: 17 Jan 2001

Date Written: November 2000

Abstract

Agreements on reforms of corporate governance, corporate law, and securities regulations, in order to augment the functioning of emerging equity markets, are complicated due to the fact that two different financial systems with some opposing features have evolved in the advanced economies, namely the insider system and the outsider system. The persistence of these systems are sought to be explained by introducing interactions between corporate governance, regulatory intervention, and capital markets into a model of evolutionary game theory. Resulting network effects are identified and analyzed. One major conclusion of the analysis is that, in the long run, reforms should be headed towards features of the outsider system because it operates better in integrated capital markets. However, attempts to achieve immediate transition into that direction can have detrimental effects, if the legal environment is not supportive enough for arm's-length financing.

Keywords: corporate governance, corporate ownership, network effects, path dependence, corporate law, securities regulation

JEL Classification: G30, K22, O16, C79

Suggested Citation

Berndt, Markus, Global Differences in Corporate Governance Systems - Theory and Implications for Reforms (November 2000). Harvard Law and Economics Discussion Paper No. 303. Available at SSRN: https://ssrn.com/abstract=255886 or http://dx.doi.org/10.2139/ssrn.255886

Markus Berndt (Contact Author)

European Investment Bank ( email )

98-100 Boulevard Konrad Adenauer
L-2950
Luxembourg
+352 4379 87619 (Phone)
+352 4379 67799 (Fax)

HOME PAGE: http://www.eib.org

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