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The Impact of National Economic Culture and Country-Level Institutional Environment on Corporate Governance Practices

Author

Listed:
  • Shirley J. Daniel

    (University of Hawaii at Manoa)

  • Joshua K. Cieslewicz

    (Woodbury School of Business, Utah Valley University)

  • Hamid Pourjalali

    (University of Hawaii at Manoa)

Abstract

We posit that national cultural practices influence the institutional environment, which in turn has an influence on corporate governance practices. We empirically evaluate these relationships using structural equation modeling. We utilize measures of national culture from Culture, Leadership, and Organizations: The Globe study of 62 Societies. For the institutional environment, we employ the World Bank Worldwide Governance Indicators. Consistent with theory, we find a strong relationship between these constructs. We further find that the institutional environment mediates the relationship between national culture and corporate governance practices. Corporate governance practices include measures of board accountability, financial disclosure and internal controls, shareholder rights, executive compensation, takeover defenses and ownership base, and corporate accountability and are available from Governance Metrics International. As both culture and institutions are linked to corporate governance practices, efforts to change corporate governance practices around the world are best informed by an appreciation of cultural as well as institutional factors.

Suggested Citation

  • Shirley J. Daniel & Joshua K. Cieslewicz & Hamid Pourjalali, 2012. "The Impact of National Economic Culture and Country-Level Institutional Environment on Corporate Governance Practices," Management International Review, Springer, vol. 52(3), pages 365-394, June.
    • Handle: RePEc:spr:manint:v:52:y:2012:i:3:d:10.1007_s11575-011-0108-x
    DOI: 10.1007/s11575-011-0108-x
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