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Globalization and Similarities in Corporate Governance:
A Cross-Country Analysis

50 Pages Posted: 14 Oct 2002  

Krishna Palepu

Harvard University - Harvard Business School; Harvard University - David Rockefeller Center for Latin American Research; Harvard Business Review; NBER; International Academy of Management

Tarun Khanna

Harvard University - Strategy Unit

Joseph Kogan

Lehman Brothers, New York

Date Written: August 9, 2002

Abstract

Some scholars have argued that globalization should pressure firms to adopt a common set of the most efficient corporate governance practices, while others maintain that such convergence will not occur because of a variety of forms of path-dependence. With new data on governance in 24 developing countries as well as data on laws protecting shareholders and creditors in 49 developed and developing countries, we search for evidence that globalization is correlated with similarity in corporate governance. We find robust evidence of de jure similarity in governance. Interestingly, this is not driven by convergence to U.S. standards. Rather pairs of economically interdependent countries - especially if the countries are both economically developed - appear to adopt common corporate governance standards, even after accounting for the effects of common legal origin. In contrast to the de jure results, we find virtually no evidence of de facto similarity in corporate governance in a battery of estimations at the country, industry and firm levels. This is consistent with either the proposition that complementarities result in different national systems appropriately having different corporate governance systems, or the proposition that globalization is not strong enough to overcome local vested interests. We conclude that globalization may have induced the adoption of some common corporate governance standards but that there is little evidence that these standards have been implemented.

Keywords: globalization, corporate governance, finance, accounting

JEL Classification: G34, M41, M44, M46

Suggested Citation

Palepu, Krishna and Khanna, Tarun and Kogan, Joseph, Globalization and Similarities in Corporate Governance: A Cross-Country Analysis (August 9, 2002). Harvard NOM Working Paper No. 02-31; Strategy Unit Working Paper No. 02-041; Harvard Business School Working Paper No. 02-041. Available at SSRN: https://ssrn.com/abstract=323621 or http://dx.doi.org/10.2139/ssrn.323621

Krishna Palepu (Contact Author)

Harvard University - Harvard Business School ( email )

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Harvard University - David Rockefeller Center for Latin American Research ( email )

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Harvard Business Review ( email )

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NBER ( email )

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HOME PAGE: http://www.nber.org/people/krishna_palepu

International Academy of Management ( email )

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HOME PAGE: http://theiam.ws/?person=palepu-krishna

Tarun Khanna

Harvard University - Strategy Unit ( email )

Harvard Business School
Boston, MA 02163
United States
617-495-6038 (Phone)
617-495-0355 (Fax)

Joseph Kogan

Lehman Brothers, New York ( email )

745 Seventh Avenue
New York, NY 10019
United States

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