Corporate Governance in Extreme Institutional Environment: Evidence From Emerging Economy

Corporate Ownership & Control / Volume 17, Issue 1, Autumn 2019 (Special Issue)

25 Pages Posted: 23 Dec 2019

See all articles by Muhammad Arslan

Muhammad Arslan

Republic of Kazakhstan - Bang College of Business

Sazali Abidin

Lincoln University (NZ); University of Waikato - Department of Economics and Finance

Dr. Ahmad Alqatan

Portsmouth Business school

Jamal Roudaki

Lincoln University (NZ)

Date Written: 2019

Abstract

Corporate governance (CG) is often split among rule and principlebased methods to regulation in distinctive institutional contexts. Relying on an alternative theoretical framework (i.e. institutional theory), rather than the dominant agency theory, this study conceptualizes corporate governance practices and structures as institutionally resolute and directed and explores the key institutional determinants of good CG practices in an emerging economy. Drawing on qualitative and quantitative methods, this study conducted semistructured interviews from eight CG professionals, followed by a survey questionnaire (N=105) from PSX listed firms. The study explores the extent to which certain underlying formal and informal institutional determinants, such as the auditing, political, legal, board, shareholders awareness, voting, culture, and values play a determining role in corporate governance. Using exploratory factor analysis, this study identified five major barriers, i.e. firm-level barriers, external barriers, social barriers, education and training barriers and legal barriers which restrain good CG practices in Pakistan. In addition, this study identified four major drivers, i.e. internal drivers, regulatory drivers, motivational drivers and collaborative drivers which can promote good CG practices in Pakistan. The findings of multiple hierarchical regression analysis revealed that the CGI score has a significant positive relationship with both return on assets and return on equity. This study emphasizes the necessity to revisit the foundation of institutional and agency theories in the environment of developing countries.

Keywords: Institutional, Determinants, Corporate Governance, Formal and Informal, Agency Theory, Barriers, Drivers, CG Compliance

JEL Classification: G00, G3, G30, G32, G34

Suggested Citation

Arslan, Muhammad and Abidin, Sazali and Alqatan, Ahmad and Roudaki, Jamal, Corporate Governance in Extreme Institutional Environment: Evidence From Emerging Economy (2019). Corporate Ownership & Control / Volume 17, Issue 1, Autumn 2019 (Special Issue). Available at SSRN: https://ssrn.com/abstract=3503900

Muhammad Arslan

Republic of Kazakhstan - Bang College of Business

Almaty
Kazakhstan

Sazali Abidin

Lincoln University (NZ) ( email )

PO Box 85084
Ellesmere Junction Road/Springs Road
Lincoln, 7647
New Zealand

University of Waikato - Department of Economics and Finance ( email )

Private Bag 3105
Hamilton, 3105
New Zealand

Ahmad Alqatan (Contact Author)

Portsmouth Business school ( email )

Portsmouth, PO1 3DE
United Kingdom

Jamal Roudaki

Lincoln University (NZ) ( email )

PO Box 85084
Ellesmere Junction Road/Springs Road
Lincoln, 7647
New Zealand
+6433253838 Ext. 8865 (Phone)
+6433253847 (Fax)

HOME PAGE: http://www.lincoln.ac.nz

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