Corporate Governance from a Cross-Country Perspective and a Comparison with Romania

This paper investigates corporate governance from a cross-country perspective and makes a comparison with Romania. There are studies that examine the corporate governance issues related to Romanian companies, but these studies provide only qualitative and descriptive accounts of the research topic, with limited cross-country analysis. The present paper complements the literature by producing a quantitative analysis of cross-country corporate governance and makes a comparison with Romania. For this purpose, a set of corporate governance indicators from a large sample of 39 advanced and developing countries was collected for the 2006–2020 period. In terms of corporate governance dimensions, it was found that Romania underperforms other developing countries in the dimensions of director liability and ownership and control, while it outperforms them in the dimensions of corporate transparency, disclosure, and shareholder rights. The results indicate that the stagnant corporate governance scores and the low development level of stock markets stand out as important business challenges for the country. The correlation and regression analyses show that stock market development is closely associated with corporate governance dimensions and, overall, corporate governance scores matter greatly for the economic growth of countries, such as Romania, which can benefit greatly from the improvement of corporate governance codes and practices in the private sector.

Can directors' liability reduction promote corporate innovation?

PurposeThis study aims to explore the effects of director liability reduction (DLR) laws on corporate innovation strategies in South Korea.Design/methodology/approachRegression analysis is used to investigate the effects of the directors' liability reduction coverage on the corporate innovation. The data includes 7,517 firm-year observations spanning from 2011 to 2017.FindingsThe authors provide empirical evidence that directors feel protected by the coverage and are able to focus more on innovative projects. Using research and development expenditure and the number of patents registered to measure the firm's innovation, we find that covered firms spend more on R&D and register more patents than non-covered firms.Originality/valueThis study extends the literature on corporate innovation. A vast amount of literature empirically tests how best to motivate directors to engage in innovative activities. On the same line, this study is the first to empirically test the effect of DLR shelters on directors' motivations toward innovation.

Sustainable Corporate Governance: A Way Forward?

This article looks at proposals to improve sustainable corporate governance of companies. These include: how to deal with shareholder primacy; a proposed requirement for companies to have an overarching purpose “to create sustainable value within planetary boundaries;” a directors’ duty to promote the undertaking’s interests to fulfil its overarching purpose; a directors’ duty to balance stakeholders’ interests; a duty to undertake a due diligence sustainability assessment; company and director liability for breaches; stakeholder enforcement of directors’ duties and public enforcement of directors’ duties. It considers problems with the proposals. It suggests alternative ways to make companies’ corporate governance more sustainable, including: improved corporate reporting relating to engagement with key stakeholders and how this contributes to the company’s long-term sustainability; better viability reporting by companies; reporting on capital allocation; better stewardship similar to the UK Stewardship Code 2020; more collaborative engagement by shareholders with companies in a manner similar to that promoted by the UK Investor Forum; making requisitioning of resolutions work better in practice; and, possibly, a vote on whether the company is creating sustainable value in the long term (a say on sustainability).

THE EFFECTS OF ACCOUNTABILITY, GOVERNANCE CAPITAL, AND LEGAL ORIGIN ON REPORTED FRAUDS

An institutional perspective is employed to illuminate the complexity of frauds in various diverse economies, in order to enhance the efficacy of previous accounting concepts. In this study, the effects of the legal, regulatory and human framework of the strength of auditing and reporting standards, and the governance capital related to global sustainable competitiveness and economic growth, etc. are analysed by linear regression (OLS) methods. Moreover, the role of other indicators i.e. financial freedom, the extent of director liability and legal origin, are interrelated with the number of fraud cases. From the results, it appears that an increased level of governance capital, financial freedom from government pressure, strengthened transparency and more protected minority investors through liable directors might increase the number of reported fraud cases in the countries and years examined. The existence of legal origin also seemed to be an appropriate proxy for an improved understanding of fraud characteristics. This evidence suggests it is worth investigating in depth the nature of financial crimes across countries for a better understanding of this phenomenon. In this way, these findings might have sufficient potential in the case of adequate policy implications within a less litigious business environment to resolve the undesirable consequences of impending financial downturns, and to achieve sustainable competitiveness and economic development.

Shareholder rights, telecommunications and director attendance around the world

Purpose This study aims to document the variation in director attendance rates around the world and investigate the influence of cross-country differences in law and infrastructure on director attendance practices. Design/methodology/approach Director attendance data are hand-collected from company annual reports and are related to differences in shareholder rights, director liability and transportation and telecommunications infrastructure across countries. Findings Using a hand-collected data set of 4,344 directorships from 33 countries, the results indicate that director attendance is significantly lower in emerging markets and is positively related to the extent of shareholder rights and the quality of telecommunications infrastructure. Originality/value For policymakers and shareholders, the findings of this study indicate that there is substantial variation in director attendance practices around the world. Across all markets, director attendance is higher when the telecommunications infrastructure better enables the potential for virtual attendance, thereby allowing directors to participate in meetings when they cannot be physically present. In emerging markets, director attendance is also higher where there is a stronger emphasis on shareholder rights, highlighting an avenue for improved director attendance by strengthening shareholder involvement in major corporate decisions.