National Culture and Corporate Governance

2015 ◽  
Vol 15 (3) ◽  
pp. 67-96 ◽  
Author(s):  
Hong K. Duong ◽  
Helen Kang ◽  
Stephen B. Salter
Keyword(s):  
Corporate Governance ◽  
National Culture ◽  
Hierarchical Linear Modeling ◽  
Economic Institutions ◽  
Linear Modeling ◽  
Firm Level ◽  
Country Level ◽  
Preference Index ◽  
Cross Country ◽  
Robust Evidence

ABSTRACT This paper examines the influence of national culture on corporate governance. We postulate that national culture can shape the contracting environments by serving as an informal constraint that affects incentives and choices in corporate governance. We hypothesize that national culture can explain cross-country variations in corporate governance after controlling for legal, political, financial, and economic institutions. We develop a Rule Preference Index as a proxy of national culture for a sample of 12,909 firm-year observations from 41 countries. Employing a hierarchical linear modeling approach to isolate the effects of firm-level and country-level variables, we find robust evidence that firms (and countries) with a higher Rule Preference Index tend to have better corporate governance.

scholarly journals Risk-Antecedents of Firms and Strategic Mediators – New Evidence from a Cross-Country Analysis

2021 ◽  
Vol 24 (1) ◽  
pp. 3-35
Author(s):  
Ranjan DasGupta ◽  
Monika Dhochak
Keyword(s):  
Corporate Governance ◽  
Emerging Market ◽  
Empirical Literature ◽  
Mediating Effects ◽  
Firm Risk ◽  
Firm Level ◽  
Country Level ◽  
Country Analysis ◽  
Cross Country ◽  
New Evidence

We examine the strength and nature of firm aspiration and expectation as strategic mediators in the association of risk antecedents and firm risk, after exploring the possible impact of such antecedents on firm aspiration, and firm aspiration’s preliminary influence on firm risk. Empirical literature is mostly silent about risk antecedents of firms in an emerging market or cross-country context, and to the best of our knowledge, the mediators proposed in this study are yet to be explored. We report strong significant positive mediating effects of firm aspiration and expectation in association of risk antecedents and firm risk. Our results also validate that all studied risk antecedents, except corporate governance- composition, significantly influence aspiration and expectation mediators and firm risk in line with our hypotheses. Our results also hold true after controlling for firm-level and country-level heterogeneities and conducting two additional robustness tests.

Discussion of “How Does Culture Impinge Upon Managers’ Demeanor of Earnings Management? Evidence From Cross-Country Analysis”

2021 ◽  
pp. 2180006
Author(s):  
Suresh Radhakrishnan ◽  
Surya Janakiraman
Keyword(s):  
Earnings Management ◽  
National Culture ◽  
Corporate Culture ◽  
Reference Points ◽  
Future Research ◽  
Economic Institutions ◽  
Country Analysis ◽  
Cross Country

We provide a framework that builds upon the findings of Chaney, Lodh and Nandy (2021) for future research to examine the mechanism through which national culture is related to earnings management. In particular, the framework can be used to examine how specific contexts, reference points, corporate culture and economic institutions affect the relation between national culture and earnings management.

scholarly journals Corruption and corporate governance: a cross-national study

2008 ◽  
Vol 5 (3) ◽  
pp. 299-315
Author(s):  
David Ng ◽  
Kun Qian ◽  
Adam Dix
Keyword(s):  
Corporate Governance ◽  
Standard Deviation ◽  
Negative Impact ◽  
National Study ◽  
Firm Level ◽  
Standard Deviation Increase ◽  
Country Level ◽  
Governance Analysis ◽  
Significant Negative Impact ◽  
Cross National Study

This paper examines the importance of country-level corruption in explaining the variation of firm-level corporate governance. Analysis of firm-level corporate governance data and country level corruption data on over 400 companies in 26 countries confirms the hypothesis that corruption has a statistically significant negative impact on the quality of a firm’s corporate governance. One standard deviation increase in country-level corruption is associated with a 0.5 to 0.7 standard deviation decrease in firm-level corporate governance scores

Do Country-level Creditor Protections Affect Firm-level Debt Structure Concentration?

2021 ◽  
Author(s):  
Kose John ◽  
Mahsa S Kaviani ◽  
Lawrence Kryzanowski ◽  
Hosein Maleki
Keyword(s):  
Debt Structure ◽  
Difference In Differences ◽  
Firm Level ◽  
Creditor Rights ◽  
Country Level ◽  
Bankruptcy Costs ◽  
Cash Flow Volatility ◽  
Cross Country ◽  
Using Data ◽  
Alternative Settings

Abstract We study the effects of country-level creditor protections on the firm-level choice of debt structure concentration. Using data from 46 countries, we show that firms form more concentrated debt structures in countries with stronger creditor protection. We propose a trade-off framework of optimal debt structure and show that in strong creditor rights regimes, the benefit of forming concentrated structures outweighs its cost. Because strong creditor protections increase liquidation bias, firms choose concentrated debt structures to improve the probability of successful distressed debt renegotiations. Firms with ex-ante higher bankruptcy costs, including those with higher intangibility, cash flow volatility, R&D expenses, and leverage exhibit stronger effects. Firms with restricted access to capital are also affected more. A difference-in-differences analysis of firms’ debt structure responses to creditor rights reforms confirms the cross-country results. Our findings are robust to alternative settings and a battery of robustness checks.

Corporate Governance and Cash Holdings

2021 ◽  
pp. 305-321
Author(s):  
Ahmed Hassanein
Keyword(s):  
Corporate Governance ◽  
Cash Holdings ◽  
Opportunistic Behavior ◽  
Governance System ◽  
Firm Level ◽  
Corporate Managers ◽  
Country Level ◽  
Corporate Governance System ◽  
The Impact ◽  
Corporate Cash Holdings

Corporate cash induces the opportunistic behavior of corporate managers that can create an agency problem. A corporate governance system controls the opportunistic behavior of managers and can affect the firm's policy on holding cash. This study explains how the aspects of corporate governance, country-level and firm-level governance, can affect the corporate policy on holding cash. First, the study provides the nature, definition, and importance of corporate cash holdings. Second, it outlines various motivations and theories behind holding corporate cash. Third, it explains the relation between firm-level governance and corporate cash holdings. Fourth, it focuses on the impact of firm-specific governance attributes on the level of corporate cash holdings. Fifth, it presents the relation between country-level governance and corporate cash holdings.

scholarly journals Religion, national culture and cross-country differences in the use of trade credit

2019 ◽  
Vol 15 (3) ◽  
pp. 350-370
Author(s):  
Markus Mättö ◽  
Mervi Niskanen
Keyword(s):  
Cultural Values ◽  
National Culture ◽  
Trade Credit ◽  
Cultural Dimensions ◽  
Firm Level ◽  
Content Type ◽  
Cross Country ◽  
New Evidence ◽  
The Relationship ◽  
Practical Implications

Purpose The purpose of this paper is to investigate whether religion or national culture can explain previously observed cross-country variation in trade credit. Design/methodology/approach Using the firm-level SME data from 35 European countries, religion and cultural factors of Hofstede and Schwartz, the authors provide new evidence on the determinants of the cross-country variation in trade credit. Findings The results indicate that religion and national culture are associated with trade credit. The authors find that the levels of trade credit are higher in Catholic countries than in Protestant ones and that peoples’ religiousness has an impact on trade credit only in Catholic countries. The authors also find that Hofstede’s cultural dimensions, such as power distance and uncertainty avoidance, are positively associated with trade credit. Practical implications Overall, authors’ findings indicate that religion and national culture are important determinants of trade credit management, and that the association between commonly used cultural values and trade credit depends on the religious, legal, and financial environment. Originality/value To the best of authors’ knowledge, this is the first study to research the relationship between national culture and trade credit.

Institutional trust and multilevel government in the European Union: Congruence or compensation?

2011 ◽  
Vol 12 (4) ◽  
pp. 551-574 ◽  
Author(s):  
Jordi Muñoz ◽  
Mariano Torcal ◽  
Eduard Bonet
Keyword(s):  
European Union ◽  
Hierarchical Linear Modeling ◽  
European Social Survey ◽  
The European Union ◽  
Linear Modeling ◽  
Country Level ◽  
National Institutions ◽  
Using Data ◽  
The Relationship ◽  
The Eu

Does trust in national institutions foster or hinder trust in the institutions of the European Union (EU)? There is no agreement in the literature on popular support for the EU about the direction of the relationship between trust in national and European institutions. Some scholars argue that both will be positively related, others have proposed the opposite hypothesis: low levels of trust in national institutions will lead citizens to higher levels of support for the EU. We argue that both hypotheses are true but operate at different levels: whereas more trusting citizens tend to be so in both the national and the European arenas, we also find that at the country level the relationship is negative: living in a country with highly trusted and well-performing institutions hinders trust in the European Parliament. We test our hypotheses using data from the European Social Survey and Hierarchical Linear Modeling.

scholarly journals Corporate Fraud, Governance, and Auditing

2012 ◽  
Vol 1 (1) ◽  
pp. 109-133 ◽  
Author(s):  
Marco Pagano ◽  
Giovanni Immordino
Keyword(s):  
Corporate Governance ◽  
Audit Quality ◽  
Managerial Compensation ◽  
Private Benefits ◽  
Firm Level ◽  
Corporate Fraud ◽  
Internal Governance ◽  
Empire Building ◽  
Country Level ◽  
Internal Governance Mechanisms

We analyze corporate fraud in a setting in which managers have superior information but are biased against liquidation because of their private benefits from empire building. This may induce them to misreport information and even bribe auditors when liquidation would be value-increasing. To curb fraud, shareholders optimally design corporate governance by jointly choosing audit quality and managerial compensation. We analyze how country-level rules affect these firm-level choices. Our analysis underscores that different country-level governance provisions have different effects on firm-level governance: Some act as substitutes of internal governance mechanisms, whereas others enhance their effectiveness and therefore complement them. (JEL G28, K22, M42)

scholarly journals Review of Corporate Governance Practices and Financial Distress Prediction

2018 ◽  
Vol 7 (4.28) ◽  
pp. 30
Author(s):  
Syed Muhammad Hassan Gillani Ahmad ◽  
Suresh Ramakrishnan ◽  
Hamad Raza ◽  
Humara Ahmad
Keyword(s):  
Corporate Governance ◽  
Financial Distress ◽  
Firm Value ◽  
Agency Cost ◽  
Review Of Literature ◽  
Firm Level ◽  
Country Level ◽  
Financial Distress Prediction ◽  
Good Corporate Governance ◽  
Governance Practices

Good corporate governance practices play an import role in increasing the firm value. Based on the agency theory related to corporate governance, if an agent (management) does not protect interest of principal (shareholders) then, agency cost is occurred and this creates a bad impact on the corporate performance. Therefore, it is necessary to address weak corporate governance practices in early stages otherwise firms can go in financial distress and eventually become bankrupt. The objective of this current study is to conduct a nonsystematic review of literature on theories and models related to corporate governance and financial distress. In the light of thorough review of literature, it is found that corporate governance variables (i.e. ownership concentration, board size, board composition, CEO duality, level of independence of board from management and managerial ownership) are good predictors for predicting financial distress. Moreover, it is also found that these corporate governance variables were not only used separately for predicting financial distress but also used along with others variables (firm level and country level) for the purpose of enhancing quality of financial distress models.

Implicit Corporate Taxes and Income Shifting

2019 ◽  
Vol 95 (3) ◽  
pp. 315-342 ◽  
Author(s):  
Kevin S. Markle ◽  
Lillian F. Mills ◽  
Braden Williams
Keyword(s):  
Multinational Firm ◽  
Income Shifting ◽  
Tax Rates ◽  
Positive Relation ◽  
Firm Level ◽  
Tax Rate ◽  
Closed Economies ◽  
Country Level ◽  
Tax Effects ◽  
Robust Evidence

ABSTRACT The effects of tax rate changes on corporate profitability are not fully understood. Implicit tax theory predicts a positive relation between country-level tax rates and firm-level pretax returns. Conversely, income shifting should make reported pretax returns inversely related to tax rates. Among single-country European firms, we find robust evidence of corporate implicit taxes following tax rate changes, concentrated in firms that rely less on intangible assets and firms in closed economies (non-EU countries). Among multinational firm affiliates, we find the effects of income shifting outweigh the effects of implicit taxes for firms with high intangibles and in countries with open borders. Our results imply income shifting estimated using only reported profits is less biased by implicit taxes in settings with open economies and firms with unique inputs or products. Our evidence also helps explain prior evidence of decreasing corporate implicit tax effects over time, particularly for multinationals.

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