The Anglo-Saxon Approach to Corporate Governance and its Applicability to Emerging Markets

13 Pages Posted: 5 Jul 2006

See all articles by Dennis C. Mueller

Dennis C. Mueller

University of Vienna - Center for Business Studies - Department of Economics

Abstract

Almost all firms start out as small, owner-managed companies. Many stay that way throughout their lives. Some create attractive investment opportunities, however, that will allow them to grow rapidly and become leading companies in their country. These firms typically do not have sufficient internal funds flows and must turn to external sources of finance. Among these is the issuance of equity. Once a firm sells shares, however, the cost of the managers engaging in on-the-job consumption falls, and they can be expected to do so at the expense of their shareholders. Knowing this, potential shareholders may be unwilling to purchase a new offering of a young firms shares, and the firm with attractive investment opportunities is unable to finance them. Strong corporate governance institutions help to protect shareholders from the discretionary use of their firms resources. This paper reviews the case for having strong corporate governance institutions to facilitate the creation of thick equity markets in the context of developing countries in emerging markets, and examines the case for relying on alternative sources of capital including the state.

Suggested Citation

Mueller, Dennis C., The Anglo-Saxon Approach to Corporate Governance and its Applicability to Emerging Markets. Corporate Governance: An International Review, Vol. 14, No. 4, pp. 207-219, July 2006. Available at SSRN: https://ssrn.com/abstract=914234 or http://dx.doi.org/10.1111/j.1467-8683.2006.00503.x

Dennis C. Mueller (Contact Author)

University of Vienna - Center for Business Studies - Department of Economics ( email )

BWZ - BrĂ¼nner Str.
A-1010 Vienna
Austria
+43 1 4277 37484 (Phone)
+43 1 4277 37498 (Fax)

HOME PAGE: http://mailbox.univie.ac.at/~muelled2/

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