Document Type: Original Article

Authors

1 Department of Accounting, Minoodasht Branch, Islamic Azad University, Minoodasht, Iran

2 Deprtment of Management and Accounting, Aliabad Katoul Branch, Islamic Azad University Aliabad Katoul, Golestan, Iran

3 Department of Accounting and Management, Gonbad Kavoos Branch, Islamic Azad University, Gonbad Kavoos, Iran

Abstract

We studied panel data for corporate governance ratings in 51 countries between 1996 and 2005 to better understand what the country-level predictors of corporate governance legitimacy might be.  Using neo-institutional theory, we found that all three forms of isomorphism influenced corporate governance at the national-level.  Specifically, both coercive isomorphic pressures were positively related to perceived corporate governance legitimacy.  In addition, both mimetic isomorphic pressures were positively related to perceived legitimacy.  Finally, one normative pressure (e.g., religious tension) was negatively related to perceived legitimacy.  This study refines and extends the governance literature, as well as the institutional perspective. 

Keywords

Aguilera, R., Jackson, G. (2003). The cross-national diversity of corporate governance: Dimensions and determinants.  Academy of Management Review. 28: 447-465. 

Aguilera, R. A. Cuervo-Cazurra.  Codes of good governance worldwide: What is the trigger?  Organization Studies. 25(3): 415-443. 

Anonymous.  (1985). The South African investment debate. International Executive. 27(1): 15-16.

Anonymous.  (1997). Freedom of the press and criminal instruction.  American Journal of Economics & Sociology. 56(1): 40-41. 

Anonymous.  (1999). The World Bank on press freedoms.  Far Eastern Economic Review. 162(19): 17-36. 

Anonymous.  (2000). China’s long road to reform.  Asiamoney. 11(6): 1-4. 

Anonymous.  (2002).  A premium for good governance? McKinsey Quarterly 3: 20-23. 

Anonymous.  (2004).  New freedom of the press in Beijing.  Far Eastern Economic Review, 167(29): 8-11. 

Aoki, M.  (2001).  Towards a comparative institutional analysis. Cambridge, MA: MIT Press. 

Atwood, J.  (2003).  The link between poverty and violent conflict.  New England Journal of Public Policy, 19(1): 159-165. 

Barling, D., T. Lang, Caraher M.  (2002). Joined-up food policy? The trials of governance, public policy and the food system.  Social Policy & Administration.  36(6): 556-574. 

Bovi, M.  (2003). The nature of the underground economy – Some evidence from OECD countries. Journal of Institutional Innovation, Development & Transition, 7: 60-71. 

Busse, M. & Hefeker, C. (2006).  Political risk, institutions, and foreign direct investment. European Journal of Political Economy, in press. 

Cadbury, A.  (1999).  What are the trends in corporate governance?  How will they impact your company?  Long Range Planning. 32(1): 12-19. 

Caddy, J.  (2001).  Why citizens are central to good governance.  OECD Observer.  229: 59-60. 

Chowdhury, S.    (2004).  The effect of democracy and press freedom on corruption: An empirical test.  Economics Letters.  85: 93-101. 

Connolly, M.  (2003).  The dual nature of trade: Measuring its impact on imitation and growth.  Journal of Development Economics, 72(1): 31-56. 

Dacin, M., J. Goodstein, W. R. Scott.  (2002).  Institutional theory and institutional change: Introduction to the special research forum. Academy of Management Journal. 45(1) 45-57. 

Davis, G.  (2005_.  New directions in corporate governance. Annual Review of Sociology.  31(1): 143-162.  Day, G., C. Freeman.  (2003).  Policekeeping is the key: Rebuilding the internal security architecture of postwar Iraq.  International Affairs. 79(2): 299-313. 

Deeg, R. S. Perez.  2000).  International capital mobility and domestic institutions: Corporate finance and governance in Europe.  Governance, 13(2): 119-152. 

Denis, D., J. McConnell.  International corporate governance.  Journal of Financial and Quantitative Analysis, 38(1): 1 – 36.

Detomasi, D.  (2002).  International institutions and the case for corporate governance: Toward a distributive governance framework?  Global Governance. 8: 421-442. 

DiMaggio,P., W. Powell  (1983).  The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields.  American Sociological Review 48:  147-160. 

Doidge, C., G. Karolyi, R. Stultz  (2004).  Why do countries matter so much for corporate governance? NBER Working Paper # 10726.  Cambridge, MA: National Bureau of Economic Research. 

Erb, C., Harvey, C. & Viskanta, T. (1996).  Political risk, economic risk, and financial risk.  Financial Analysts Journal, November/December: 29-46. 

Farrell, D., A. Zainulbhai (2004).  A richer future for India.  McKinsey Quarterly, Special Edition, 26-35. 

Fligstein, N., Freeland, R.  (1995). Theoretical and comparative perspectives on corporate organization.  Annual Review of Sociology. 21(1): 21-44. 

Freedom House (2006).  Press Freedom Detail Data, 1994-2005. URL: http://www.freedomhouse.org/template.cfm?page=16&year=2005.

Friedman, T. 2000. The Lexus and the olive tree.  New York; Random House. 

Guillen, M. 1998.  Corporate governance and globalization: Is there convergence across countries? Advances in International Comparative Management. 13: 175-204. 

Guler, I., M. Guillen, J. Macpherson  2002.  Global competition, institutions and the diffusion of organizational practices: The international spread of ISO 9000 quality certificates.  Administrative Science Quarterly, 47(2): 207-233. 

Grigorian, D. & Martinez, A. (2001). Industrial growth and the quality of institutions: What do (transition) economies have to gain from the rule of law?” Journal for Institutional Innovation, Development, and Transition, 5: 73-82. 

Groenewegan, J.  (2004).  Who should control the firm?  Insights from new and original institutional economics.  Journal of Economic Issues. 38(2): 353-361. 

Haniffa, R., T. Cooke.  (2002). Culture, corporate governance and disclosure in Malaysian corporations.  Abacus, 38(3): 317-349. 

Hartley, J., M. Butler, Bennington. J. (2002).  Local government modernization: UK and comparative analysis from an organizational perspective. Public Management Review, 4(3): 387-404. 

Herriott, P., W. Scott-Jackson, W.  (2002).  Globalization, social identities, and employment.  British Journal of Management, 13: 249-257. 

Isaenko, A., Petschauer, P. (2000). A failure that transformed Russia: The 1991-94 democratic state-building experiment in Chechnya.  International Social Science Review. 75(1/2): 3-15. 

Jackson, P., J. Stanfield. (2004). The role of the press in a democracy: heterodox economics and the propaganda model.  Journal of Economic Issues, 38(2): 475-482.

Jesover, F., G. Kirkpatrick.  (2005).  The revised OECD principles of corporate governance and their relevance to Non-OECD countries.  Corporate Governance: International Review, 13(2): 127-136. 

Kalliny, M., Lemaster, J.  (2005).  Before you go, you show know: The impact of war, economic, cultural and religious animosity on entry modes. Marketing Management Journal, 15(2): 18-28. 

Keohane, R. (2005).  Abuse of power: Assessing accountability in world politics. Harvard International Review, 27(2): 48-53. 

Kim, H. (2003).  Media, the public, and freedom of the press.  Social Indicators. 62/63(April): 345-365.

Kolleck, T.  (1981).  Jerusalem: Present and future.  Foreign Affairs. 59(5): 1041-1049. 

Kraatz, M., E. Zajac.  (2001).  How organizational resources affect strategic change and performance in turbulent environments: Theory and evidence.  Organization Science, 12(5): 632-657.

Krause, V., S. Suzuki  (2005).  Causes of civil war in Asia and Sub-Saharan Africa: A comparison.  Social Science Quarterly, 86(1): 159-177. 

Kubicek, P.  (1998).  Authoritarianism in central Asia: Curse or cure?  Third World Quarterly, 19(1): 29-43. 

LaPorta, R., F. Lopez-de-Silanes, A. Shleifer, R. Vishny.  (1997). Trust in large organizations. American Economic Review, 87: 333-338. 

LaPorta, R., F. Lopez-de-Silanes, A. Shleifer, R. Vishny.  (2000).  Investor protection and corporate governance.  Journal of Financial Economics.  58(1/2): 3-27. 

Lederman, D., N. Loayza, R. Soares.  (2005).  Accountability and corruption: Political institutions matter.  Economics & Politics, 17(1): 1-35. 

Lawton, C. L.; S. M. McGuire. (2001). Supranational governance and corporate strategy: the emerging role of the World Trade organization. International Business Review, 10: 217-233.

Liu, G. S., W. T. Woo. (2001). How will ownership in China’s industrial sector evolve with WTO accession? China Economic Review, 12: 137-161.

Mattli, W., T. Buthe.  (2005).  Accountability in accounting? The politics of private rule-making in the public interest.  Governance. 18(3): 399-429. 

Meyer, J., B. Rowan.  (1977).  Institutionalized organizations: Formal structure as myth and ceremony.  American Journal of Sociology. 83: 340-363. 

Minow, M. (2001).  On being religious professional: The religious turn in professional ethics.  University of Pennsylvania Law Review, 150(2): 661-689. 

Mizruchi, M., L. Fein  (1999).  The social construction of organizational knowledge: A study of the uses of coercive, mimetic, and normative isomorphism.  Administrative Science Quarterly, 44(4): 653-683. 

Musah, A. (2002).  Privatization of security, arms proliferation, and the process of state collapse in Africa. Development & Change, 33(5): 911-934. 

Nisser, C., D. Wallace.  (1978).  National treatment for multinational enterprises: will the OECD governments meet the challenge?  Columbia Journal of World Business. 13(3): 13-25.  

North, D.  (1990).  Institutions, institutional change, and economic performance.  Cambridge; Cambridge University Press. 

OECD.  (2006).  Organization for Economic Cooperation & Development. URL:  www.oecd.org.

Pantzalis, C., D. Stangeland, H. Turtle.  (2000).  Political elections and the resolution of uncertainty: The international evidence. Journal of Banking and Finance, 24(10): 1575-1604. 

Perkins, M.  (2001).  Violence against the press in Latin America.  Journalism & Mass Communication Quarterly, 78(2): 275-290. 

Powell, W., P. Dimaggio. (eds.) (1991).  The new institutionalism in organizational analysis.  Chicago, IL: University of Chicago Press. 

Pratt, M., K. Rockmann, J. Kaufmann  (2006).  Constructing professional identity: The role of work and identity learning cycles in the customization of identity among medical residents.  Academy of Management Journal, 49(2): 235-262. 

Radaelli, C.  (2000).  Policy transfer in the European Union: Institutional Isomorphism as a source of legitimacy.  Governance: An International Journal of Policy and Administration.  13(1): 25-43.

Rajan, R., L. Zingales.  (2003).  The great reversals: the politics of financial development in the twentieth century.  Journal of Financial Economics, 69: 5-50. 

Rindova, V., T. Pollack, M. Hayward.  (2006).  Celebrity firms: The social construction of market popularity.  Academy of Management Review, 31(1): 50-71. 

Rubin, D.  (1973).  When the press puts the pressure on business.  Management Review, 62(2): 4-15. 

Sandholtz, W., M. Gray  (2003).  International integration and national corruption.  International Organization.  57: 761-800. 

Sarkar, J., S. Sarkar (2000).  Large shareholder activism in corporate governance in developing countries: Evidence from India.  International Review of Finance. 1(3): 161-194. 

Schneper, W., M. Guillen.  (2004).  Stakeholder rights and corporate governance: A cross-national study of hostile takeovers.  Administrative Science Quarterly, 49:  263-295. 

Scott, W.R.  (1987).  The adolescence of institutional theory.  Administrative Science Quarterly.  32: 493-511. 

Scott, W.R.  (2001).  Institutions and organizations.  Thousand Oaks, CA: Sage Publications. 

Schneper, W., M. Guillen.  (2004). Stakeholder rights and corporate governance: Across-national study of hostile takeovers.  Administrative Science Quarterly, 49: 263-295. 

Seidman, G. (1999).  Is South Africa different? Sociological comparisons and theoretical contributions from the land of apartheid.  Annual Review of Sociology. 25: 419-440. 

Sison, A.  (2000).  The cultural dimension of codes of corporate governance: A focus on the Olivencia Report.  Journal of Business Ethics. 27(1/2): 181-192. 

Spalding, N.  (2000).  A cultural explanation of collapse into civil war: Escalation of tension in Nigeria.  Culture & Psychology, 6(1): 51-88. 

Suchman, M.  (1995).  Managing legitimacy: Strategic and institutional approaches.  Academy of Management Review, 20(3): 571-610. 

Teegen, H.  (2003).  International NGOs as global institutions: Using social capital to impact multinational enterprises and governments.  Journal of International Management. 9(3): 271-286. 

Teegen, H., J. Doh, S. Vachani (2004).  The importance of nongovernmental organizations (NGOs) in global governance and value creation: An international business research agenda.  Journal of International Business Studies, 35(6): 463-483. 

Thomas, H.  (2004).  British planning and the promotion of race equality: The Welsh experience of race equality schemes. Planning, Practice & Research. 19(1): 33-47. 

Turnbull, S.  (1997).  Corporate governance: its scope, concerns and theories.  Corporate Governance: An International Review. 5(4) 180-206. 

Wasnow, B.  (2001).  A case for free trade: The United States and globalization in Asia.  Challenge, 44(4) 59-66.

Witherell, W. (2000).  Corporate governance: A basic foundation for global economy.  OECD Observer. 221/222: 24-28. 

Pickford, M.  (1987).  Industry inefficiency, monopoly, and import liberalization in New Zealand. 

PRS Group, Inc. (2006) International country risk guide.

Wooldridge, J.  (2002).  Econometric Analysis of Cross Section and Panel Data.  Cambridge, MA: The MIT Press.

World Bank (2006)  Imports as percent of GDP statistics.  URL: http://www.worldbank.org/wbi/governance/govdatasets/index.html.

World Competitiveness Report.  (1996-2005).  Lausanne, Switzerland: IMD. 

World Trade Organization (2006).  Understanding the WTO – members and observers.  URL: http://www.wto.org/english/thewto_e/whatis_e/tif_e/org6_e.htm. 

Wu, X.  (2005).  Corporate governance and corruption: A cross-country analysis.  Governance: An International Journal of Policy, Administration and Institutions.  18(2) 151-170. 

Zainulbhai, A. (2005).  What executives are asking about India.  McKinsey Quarterly, Special Edition, 26-33. 

Zhu, Q. (2000).  The process of professionalism and the rebuilding of administrative ethics in post-Mao china.  International Journal of Public Administration.  23(11): 1943-1965.