IDEAS home Printed from https://ideas.repec.org/a/kap/jbuset/v166y2020i1d10.1007_s10551-019-04126-7.html
   My bibliography  Save this article

Ethos is Destiny: Organizational Values and Compliance in Corporate Governance

Author

Listed:
  • Maria Fotaki

    (Department of Management Science and Technology, Athens University of Economics and Business)

  • Spyros Lioukas

    (Department of Management Science and Technology, Athens University of Economics and Business)

  • Irini Voudouris

    (Department of Management Science and Technology, Athens University of Economics and Business)

Abstract

This paper investigates the effect of enacted ethical and instrumental values on corporate governance effectiveness. It further considers whether and how compliance with formal corporate governance codes influences the effect of these organizational values on governance effectiveness. Empirical evidence based on a sample of firms listed in the Athens Stock Exchange shows that strong ethical values are the key element for effective corporate governance, while instrumental values play a significant role only in the presence of compliance. Compliance, although not sufficient by itself, serves as a complementary mechanism strengthening the effects of ethical values and creating the conditions by which instrumental values can act in favor of corporate governance. The results highlight that governance benefits can emanate from maintaining high ethical standards as well as from synergies between compliance and a focus on organizational values. Overall, our findings provide important implications for managers regarding how to utilize behavioral along with structural governance mechanisms to enhance corporate governance. The findings add to the behavioral perspective of corporate governance bringing aspects of the social fabric into the corporate governance puzzle.

Suggested Citation

  • Maria Fotaki & Spyros Lioukas & Irini Voudouris, 2020. "Ethos is Destiny: Organizational Values and Compliance in Corporate Governance," Journal of Business Ethics, Springer, vol. 166(1), pages 19-37, September.
    • Handle: RePEc:kap:jbuset:v:166:y:2020:i:1:d:10.1007_s10551-019-04126-7
    DOI: 10.1007/s10551-019-04126-7
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10551-019-04126-7
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s10551-019-04126-7?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Julie Juan Li & Laura Poppo & Kevin Zheng Zhou, 2010. "Relational mechanisms, formal contracts, and local knowledge acquisition by international subsidiaries," Strategic Management Journal, Wiley Blackwell, vol. 31(4), pages 349-370, April.
    2. Benjamin E. Hermalin & Michael S. Weisbach, 1988. "The Determinants of Board Composition," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 589-606, Winter.
    3. Randolph P. Beatty & Edward J. Zajac, 1995. "Managerial Incentives, Monitoring, And Risk Bearing In Initial Public Offering Firms," Journal of Applied Corporate Finance, Morgan Stanley, vol. 8(2), pages 87-96, June.
    4. Barry Mitnick, 1975. "The theory of agency," Public Choice, Springer, vol. 24(1), pages 27-42, December.
    5. W. Chan Kim & Peter Hwang & William P. Burgers, 1989. "Global diversification strategy and corporate profit performance," Strategic Management Journal, Wiley Blackwell, vol. 10(1), pages 45-57, January.
    6. Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2015. "The value of corporate culture," Journal of Financial Economics, Elsevier, vol. 117(1), pages 60-76.
    7. He Peng & Feng Wei, 2018. "Trickle-Down Effects of Perceived Leader Integrity on Employee Creativity: A Moderated Mediation Model," Journal of Business Ethics, Springer, vol. 150(3), pages 837-851, July.
    8. Dahya, Jay & Dimitrov, Orlin & McConnell, John J., 2008. "Dominant shareholders, corporate boards, and corporate value: A cross-country analysis," Journal of Financial Economics, Elsevier, vol. 87(1), pages 73-100, January.
    9. Art Durnev & E. Han Kim, 2005. "To Steal or Not to Steal: Firm Attributes, Legal Environment, and Valuation," Journal of Finance, American Finance Association, vol. 60(3), pages 1461-1493, June.
    10. Sandra A. Waddock & Samuel B. Graves, 1997. "The Corporate Social Performance–Financial Performance Link," Strategic Management Journal, Wiley Blackwell, vol. 18(4), pages 303-319, April.
    11. Scott L. Newbert, 2018. "Achieving Social and Economic Equality by Unifying Business and Ethics: Adam Smith as the Cause of and Cure for the Separation Thesis," Journal of Management Studies, Wiley Blackwell, vol. 55(3), pages 517-544, May.
    12. Ruth V. Aguilera & Igor Filatotchev & Howard Gospel & Gregory Jackson, 2008. "An Organizational Approach to Comparative Corporate Governance: Costs, Contingencies, and Complementarities," Organization Science, INFORMS, vol. 19(3), pages 475-492, June.
    13. Peter Verhezen, 2010. "Giving Voice in a Culture of Silence. From a Culture of Compliance to a Culture of Integrity," Journal of Business Ethics, Springer, vol. 96(2), pages 187-206, October.
    14. Vincenzo Verardi & Catherine Dehon, 2010. "Multivariate outlier detection in Stata," Stata Journal, StataCorp LP, vol. 10(2), pages 259-266, June.
    15. Huse, Morten, 1993. "Relational norms as a supplement to neo-classical understanding of directorates: An empirical study of boards of directors," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 22(3), pages 219-240.
    16. Lorraine Uhlaner & Mike Wright & Morten Huse, 2007. "Private Firms and Corporate Governance: An Integrated Economic and Management Perspective," Small Business Economics, Springer, vol. 29(3), pages 225-241, October.
    17. Kenneth J. Rediker & Anju Seth, 1995. "Boards of directors and substitution effects of alternative governance mechanisms," Strategic Management Journal, Wiley Blackwell, vol. 16(2), pages 85-99.
    18. Dunn, Mark G. & Norburn, David & Birley, Sue, 1994. "The impact of organizational values, goals, and climate on marketing effectiveness," Journal of Business Research, Elsevier, vol. 30(2), pages 131-141, June.
    19. Yiannis E. Spanos & Spyros Lioukas, 2001. "An examination into the causal logic of rent generation: contrasting Porter's competitive strategy framework and the resource‐based perspective," Strategic Management Journal, Wiley Blackwell, vol. 22(10), pages 907-934, October.
    20. Baker, Thomas L. & Hunt, Tammy G. & Andrews, Martha C., 2006. "Promoting ethical behavior and organizational citizenship behaviors: The influence of corporate ethical values," Journal of Business Research, Elsevier, vol. 59(7), pages 849-857, July.
    21. Jana L. Craft, 2018. "Common Thread: The Impact of Mission on Ethical Business Culture. A Case Study," Journal of Business Ethics, Springer, vol. 149(1), pages 127-145, April.
    22. Noreen, Eric, 1988. "The economics of ethics: A new perspective on agency theory," Accounting, Organizations and Society, Elsevier, vol. 13(4), pages 359-369, June.
    23. Karl E. Weick & Kathleen M. Sutcliffe & David Obstfeld, 2005. "Organizing and the Process of Sensemaking," Organization Science, INFORMS, vol. 16(4), pages 409-421, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Areneke, Geofry & Adegbite, Emmanuel & Tunyi, Abongeh, 2022. "Transfer of corporate governance practices into weak emerging market environments by foreign institutional investors," International Business Review, Elsevier, vol. 31(5).
    2. Batten, Jonathan A. & Boubaker, Sabri & Kinateder, Harald & Choudhury, Tonmoy & Wagner, Niklas F., 2023. "Volatility impacts on global banks: Insights from the GFC, COVID-19, and the Russia-Ukraine war," Journal of Economic Behavior & Organization, Elsevier, vol. 215(C), pages 325-350.
    3. Maria Aluchna & Tomasz Kuszewski, 2022. "Responses to corporate governance code: evidence from a longitudinal study," Review of Managerial Science, Springer, vol. 16(6), pages 1945-1978, August.
    4. Ahmed Khalid Alrashedi, 2024. "The Key Sustainable Strategies Criteria for Effective Human Resource Management Practices," Sustainability, MDPI, vol. 16(12), pages 1-28, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jordi A. Surroca & Ruth V. Aguilera & Kurt Desender & Josep A. Tribó, 2020. "Is managerial entrenchment always bad and corporate social responsibility always good? A cross‐national examination of their combined influence on shareholder value," Strategic Management Journal, Wiley Blackwell, vol. 41(5), pages 891-920, May.
    2. Yanina Rashkova & Ludovica Moi & Francesca Cabiddu, 2024. "Addressing the Societal Challenges in Organizations: The Conceptualization of Mindfulness Capability for Social Justice," Journal of Business Ethics, Springer, vol. 189(2), pages 249-268, January.
    3. Valeria Naciti & Fabrizio Cesaroni & Luisa Pulejo, 2022. "Corporate governance and sustainability: a review of the existing literature," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 26(1), pages 55-74, March.
    4. Hussein Abedi Shamsabadi & Byung-Seong Min & Richard Chung, 2016. "Corporate governance and dividend strategy: lessons from Australia," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 12(5), pages 583-610, October.
    5. Schmid, Stefan & Roedder, Felix, 2021. "Gaijin invasion? A resource dependence perspective on foreign ownership and foreign directors," International Business Review, Elsevier, vol. 30(6).
    6. Lélis Pedro Andrade & Aureliano Angel Bressan & Robert Aldo Iquiapaza, 2017. "Dual class shares, board of directors’ effectiveness and firm’s market value: an empirical study," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 21(4), pages 1053-1092, December.
    7. Chaur-Shiuh Young & Liu-Ching Tsai & Pei-Gin Hsieh, 2008. "Voluntary Appointment of Independent Directors in Taiwan: Motives and Consequences," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 35(9-10), pages 1103-1137.
    8. Mamdouh Abdulaziz Saleh Al-Faryan, 2021. "The effect of board composition and managerial pay on Saudi firm performance," Review of Quantitative Finance and Accounting, Springer, vol. 57(2), pages 693-758, August.
    9. Rüdiger Fahlenbrach & Angie Low & René M. Stulz, 2010. "The Dark Side of Outside Directors: Do they Quit When They are Most Needed?," Swiss Finance Institute Research Paper Series 10-17, Swiss Finance Institute.
    10. Al-Shaer, Habiba & Uyar, Ali & Kuzey, Cemil & Karaman, Abdullah S., 2023. "Do shareholders punish or reward excessive CSR engagement? Moderating effect of cash flow and firm growth," International Review of Financial Analysis, Elsevier, vol. 88(C).
    11. Iwasaki, Ichiro & 岩﨑, 一郎 & イワサキ, イチロウ, 2007. "Endogenous board formation and its determinants in a transition economy: evidence from Russia," CEI Working Paper Series 2007-1, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    12. Hüttenbrink, Alexander & Oehmichen, Jana & Rapp, Marc Steffen & Wolff, Michael, 2014. "Pay-for-performance – Does one size fit all? A multi-country study of Europe and the United States," International Business Review, Elsevier, vol. 23(6), pages 1179-1192.
    13. Rojas-de-Gracia, María-Mercedes & Casado-Molina, Ana-María & Alarcón-Urbistondo, Pilar, 2021. "Relationship between reputational aspects of companies and their share price in the online environment," Technology in Society, Elsevier, vol. 64(C).
    14. de Carvalho, Antonio Gledson & Dal'Bó, Filipe & Sampaio, Joelson, 2021. "Determinants of corporate governance practices in Brazil," Emerging Markets Review, Elsevier, vol. 48(C).
    15. Michael Ryngaert & Shawn Thomas, 2012. "Not All Related Party Transactions (RPTs) Are the Same: Ex Ante Versus Ex Post RPTs," Journal of Accounting Research, Wiley Blackwell, vol. 50(3), pages 845-882, June.
    16. Bruno, Valentina & Claessens, Stijn, 2010. "Corporate governance and regulation: Can there be too much of a good thing?," Journal of Financial Intermediation, Elsevier, vol. 19(4), pages 461-482, October.
    17. Karaevli, Ayse & Yurtoglu, B. Burcin, 2021. "Family ownership, market development, and internationalization of Turkish business groups (1925-2017)," Journal of World Business, Elsevier, vol. 56(6).
    18. Nguyen, Thi Tuyet Mai, 2017. "An examination of independent directors in Vietnam," OSF Preprints ay6dv, Center for Open Science.
    19. Hasan, Iftekhar & Karavitis, Panagiotis & Kazakis, Pantelis & Leung, Woon Sau, 2019. "Corporate Social Responsibility and Profit Shifting," MPRA Paper 91580, University Library of Munich, Germany.
    20. Cemil Kuzey & Habiba Al-Shaer & Ali Uyar & Abdullah S. Karaman, 2024. "Do board monitoring and audit committee quality help risky firms reduce CSR controversies?," Review of Quantitative Finance and Accounting, Springer, vol. 63(3), pages 1007-1045, October.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jbuset:v:166:y:2020:i:1:d:10.1007_s10551-019-04126-7. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.