This new issue contains eight excellent new studies on international corporate governance. Accounting, finance, and management scholars hailing from academic institutions from all over the world offer penetrating insights on the antecedents and effects of corporate governance in both developed and developing economies.
In the lead article by Inci, Lee, and Suk, these authors look at the effects of capital investment on firm profitability using pecking order theory. They examine this relationship in 40 different countries from 1988–2004 and observe that the legal system and level of financial development of the economy significantly influence this relationship.
In the aftermath of the global financial crisis where financial returns were pursued vigorously and financial risk was ignored, the next two articles are very timely. First, Steen, Brown, and Foreman use auditing theory to tease out the governance implications of technological and business risk within high technology firms operating in developed economies. Complementing that article, Sahnound and Zara examine the financial risks that arise within the context of the auditor-auditee relationship using prospect theory in Tunisia, a developing economy. In sum, these two articles suggest that a future theory of corporate governance must consider both risk and return, and they both provide insights on mechanisms to avoid unnecessary risks.
The fourth article in this issue is written by Fassin and van Rossem. These authors remind us that effective corporate governance does not rely exclusively on external monitoring since some firms take their social obligations seriously and are able to self-regulate. Specifically, they conduct field interviews of practitioners in an attempt to make sense of the conceptual differences between corporate social responsibility and business ethics. Conceptual clarity is crucial for any global theory of corporate governance and this article helps to clarify these two inter-related concepts.
Next, Garcia-Meca and Sanchez-Balesta conduct a meta-analysis of 35 studies examining the antecedents of earnings management. Amongst many interesting findings, this review article finds that constraints on earnings management differ due to governance context. As such, this suggests that a global theory of corporate governance may be contingent on the governance environment.
Our next two articles focus on the financial stakeholders of the firm. Specifically, Shyu and Lee use agency insights to explain why debt maturity varies so much across family-controlled firms in Taiwan. Specifically, they find that issuers of short-term debt may be an effective external monitor of family-controlled firms. Then, Pazzaglia, Mengoli, and Sapienza seek to explain the effect of legal reforms enacted in 1998 on protection of minority shareholders in Italy. They find that minority owners are somewhat better protected as compared to the pre-reform period, but not to the extent envisioned by legal reformers. This suggests that corporate governance reform takes time and requires national persistence to bring about more transparency and accountability.
Finally, Ward, Brown, and Rodriguez seek to explain the impact of “governance bundles” within Anglo-Saxon economies. They insightfully argue that instead of looking at corporate governance mechanisms in isolation of each other, we should look at these mechanisms are complementary and substitutable bundles of mechanisms. Using literature and logic from the agency and stewardship perspectives, they conceptually argue for different reactions by various governance bundles to firm performance levels that do not meet expectations.
Across these eight articles, a wide variety of dependent variables and theoretical frameworks are used or developed. This proliferation suggests that the field is making progress in capturing the complexity of the cross-national phenomena known as corporate governance. We look forward to future research that not only captures this complexity, but distills it down to its essence into a rigorous and relevant global theory of corporate governance.