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EDITORIAL
Law, finance, and the international mobility
of corporate governance
Douglas Cumming1,Igor Filatotchev2,3, April Knill4,David Mitchell Reeb5 andLemma Senbet6,7
1Schulich School of Business, York University,
Toronto, ON, Canada; 2City, University ofLondon, 106 Bunhill Row, London EC1Y 8TZ, UK;3Vienna University of Economics and Business,
Vienna, Austria; 4Florida State University,Tallahassee, FL, USA; 5Department of Finance,
National University of Singapore, Singapore,
Singapore; 6Robert H. Smith School of Business,
University of Maryland, College Park, MD, USA;7African Economic Research Consortium (AERC),
Nairobi, Kenya
Correspondence:I Filatotchev, City, University of London, 106Bunhill Row, London EC1Y 8TZ, UKe-mail: [email protected]
AbstractWe introduce the topic of this Special Issue on the ‘‘Role of Financial and Legal
Institutions in International Governance’’, with a particular emphasis on anotion of ‘‘international mobility of corporate governance’’. Our discussion
places the Special Issue at the intersection of law, finance, and international
business, with a focus on the contexts of foreign investors and directors.Country-level legal and regulatory institutions facilitate foreign ownership,
foreign directors, raising external financial capital, and international M&A
activity. The interplay between the impact of foreign ownership and foreigndirectors on firm governance and performance depends on international
differences in formal/regulatory institutions. In addition to legal conditions,
informal institutions such as political connections also shape the economic
value of foreign ownership and foreign directors. We highlight key papers in theliterature, provide an overview of the new papers in this Special Issue, and offer
suggestions for future research.
Journal of International Business Studies (2017) 48, 123–147.doi:10.1057/s41267-016-0063-7
Keywords: law and finance; corporate governance; mobility; foreign investors; directors;political connections
INTRODUCTIONInternational Business (IB), economics and finance scholars havedeveloped a significant body of research focused on the interna-tional mobility of capital, labor and goods. Two main theoreticalapproaches to international business strategy – internalizationtheory and the resource-based view (RBV) – assume that the mostefficient firm strategy will be that which maximizes rents from thefirm-specific assets and thus maximizes the long-run value of thefirm. The role of management in such theories is essentially toidentify and implement this efficient strategy. Organizationalcontrol processes are equally important in terms of creating valuein the context of globalization. These processes facilitate account-ability, monitoring and trust within and outside of the firm, andshould ultimately lead to improvements in the firm’s performanceand long-term survival.
Although prior IB and international finance studies have iden-tified a number of governance factors that may affect globalstrategy both at the headquarter and subsidiary levels of amultinational company (MNC), this research generally considerscorporate governance functions and processes as being location-
Received: 21 November 2016Accepted: 12 December 2016Online publication date: 10 February 2017
Journal of International Business Studies (2017) 48, 123–147ª 2017 Academy of International Business All rights reserved 0047-2506/17
www.jibs.net
specific (Filatotchev & Wright, 2011). The underly-ing assumption in the vast majority of governancepapers in the context of globalization is thatgovernance is immobile, and various governancemechanism are location-bound unlike interna-tional flows of factors of production, goods andservices that form a core research area of IB. Thefocus in traditional international business has beenon labor, capital, and goods, as well as the controlprocesses around these inputs. Common controland governance processes facilitate trust within andoutside of a firm. In a repeated game, trust plays arole that limits defections. Ownership or foreigndirect investment (FDI) in an international businesscontext is the key to creating a repeated game.Therefore FDI may facilitate the creation of trustthrough the overseas extension of governancepractices.
Corporate governance research from an IB per-spective has traditionally not considered the mobil-ity of corporate governance. However, there is agrowing body of theoretical and empirical evidencepointing out that corporate governance structuresand processes are becoming increasingly mobileinternationally. Mobility of corporate governancein this context refers to scenarios where firmsexport or import governance practices in the pro-cess of internationalization. For example, a firmmay export its governance practices to its acquisi-tion target in an overseas location. Likewise, a localfirm may import overseas governance practices byappointing foreign directors on its board or attract-ing foreign investors through a cross-listing on aforeign exchange. In this introduction, we focus onfour related channels through which corporategovernance may be internationally mobile andhighlight the contributions of the papers in thisSpecial Issue: (1) international mergers and acqui-sitions (Ellis, Moeller, Schlingemann, & Stulz, 2017;Renneboog, Szilagyi, & Vansteenkiste, 2017), (2)foreign ownership (Aguilera, Desender, Lopez-Puer-tas, & Lee, 2017; Calluzzo, Dong, & Godsell, 2017),(3) foreign political connections (Sojli & Tham,2017), and (4) foreign directors (Miletkov, Poulsen,& Wintoki, 2017). Overall, the recognition ofcorporate governance mobility presents an impor-tant opportunity for further theory building in thecontest of both IB and finance research, and this is afocal point of this Special Issue.
Further, we build on an established tradition in theIB and finance areas focused on the role of formaland informal institutions and show that themobilityof corporate governance is strongly associated with
diverse institutional contexts within firms operatedomestically and globally. As Bell, Filatotchev, &Aguilera (2014) argue, firms are embedded in differ-ent national institutional systems, and they experi-ence divergent degrees of internal and externalpressures to implement a range of governancemechanisms that are deemed efficient in a specificnational context. Therefore we suggest that formalinstitutional factors such as legal or regulatory, aswell as informal (cognitive and cultural) institutionsmay shape the process of governance mobility.Likewise important is that cross-national institu-tional differences may pose a barrier for an interna-tional transfer of governance practices.The ideas of mobile governance in different
institutional contexts form a theoretical founda-tion for the papers included in this Special Issue.The call for papers for this Special Issue drew 84submissions written by authors stemming from 24nations. Thirteen papers were accepted for a paperdevelopment workshop in London in February2016, and six of those papers appear in this SpecialIssue (an additional three appear in regular JIBSissues). Taken together, these papers provide anovel contribution to IB research by focusing oninternational dimensions of corporate governancemobility and the implications of macro-level,institutional factors on the governance processesand outcomes across national borders.This introduction to the Special Issue is organized
as follows. The next section discusses institutionalaspects of corporate governance. The section there-after discusses the mobility of corporate gover-nance. We then introduce the specific topicspertaining to mobility in the case of internationalmergers and acquisitions, foreign owners, andforeign directors. We provide evidence of thegrowing importance of these topics in relation tomore traditional topics in international business.The last section offers concluding remarks andsuggestions for further research.
INSTITUTIONAL ASPECTS OF GOVERNANCEIn their seminal review of corporate governanceresearch, Shleifer & Vishny (1997 p. 773) providethe following definition of corporate governance:‘‘Corporate governance deals with the agencyproblem: the separation of management andfinance. The fundamental question of corporategovernance is how to assure financiers that they geta return on their financial investment.’’ As corpo-rate governance research has evolved, studies have
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broadened the definition of ‘‘good governance’’ byconsidering it as a process-driven function thatfacilitates value creation. These processes developover time across countries and within firms. Thefinancial impact of good governance on the firm isunambiguously positive, both in terms of short-term efficiency outcomes and longer-term sustain-ability of the business. Perhaps most intuitive isthat good governance, which minimizes thechance of managerial tunneling – defined by John-son, La Porta, Lopez-de-Silanes, & Shleifer (2000) asthe expropriation of corporate assets or profits –leads to an enhanced capability of the firm to raiseexternal capital (Aggarwal, Klapper, & Wysocki,2005). Gompers, Ishii, & Metrick (2003) andBebchuk, Cohen, & Ferrell (2009) provide impor-tant metrics for the robustness of governance at thefirm level and find that good governance firms havehigher firm value, profits, and sales growth. Thefinance literature also suggests that good gover-nance leads to an increase in Tobin’s Q (Daines,2001) and higher firm value in M&A (Cremers &Nair, 2005), among other factors. The drivers of‘‘good governance’’ and its financial benefits cancome from monitoring by the Board of Directors(see, e.g., Huson, Parrino, & Starks, 2001), institu-tional investors (see, e.g., Li, Moshirian, Pham, &Zein, 2006), creditors (Nini, Smith, & Sufi, 2012),whistle blowers (Dyck, Morse, & Zingales, 2010)and the market for corporate control (Masulis,Wang, & Xie, 2012).
Management and IB perspectives have furtherbroadened research on ‘‘good corporate gover-nance’’ by considering different organizationaland institutional contexts as well as their effectson the firm’s internationalization. Some studies, forexample, indicate that monitoring, though impor-tant, is not the only function of corporate gover-nance. Indeed, good governance can also be viewedas having top managerial competency (Kor, 2003)or investment in firm-specific human capital thatcan enhance the quality of decision-making (Ma-honey & Kor, 2015). Governance is particularlyimportant to firms in less competitive industries(Giroud & Mueller, 2011) or in family-controlledfirms (Anderson & Reeb, 2004). Importantly, goodgovernance provides legitimacy to managerialactions (Lipton & Lorsch, 1992; Aguilera & Jackson,2003) such that investors feel protected frommanagement consuming private benefits of con-trol. The extent of this legitimacy can differ acrosscountries depending on laws, culture and levels ofcorruption (Judge, Douglas, & Kutan, 2008).
A growing number of studies suggest that firm-level governance mechanisms are institutionallyembedded (e.g., Aguilera & Jackson, 2003; Bell et al.,2014; McCahery, Sautner, & Starks, 2017), and theirfunctioning as well as organizational impact may bedifferent, even in country settings that appearsimilar legally. This leads to two significant exten-sions of previous research based on a universalisticagency framework. First, governance problems atthe firm level are not universal; they may differdepending on the firm’s institutional environment.Second, the effectiveness of governance remediesaimed at mitigating agency conflicts may dependon formal and informal institutions. ‘‘Law andfinance’’ research has made the first inroads intoexploring how national settings may lead to differ-ent firm-level governance models around the world.In seminal papers, La Porta, Lopez-de-Silanes,
Shleifer, & Vishny (1997, 1998, 2000) and La Porta,Lopez-de-Silanes, Pop-Eleches, & Shleifer (2004)suggest that legal origin is influential in a nation’sprotection of outside investors (investors otherthan management or controlling shareholders),which the authors suggest is largely the purposeof corporate governance. Though legal tradition(‘‘common law’’ and ‘‘civil law’’) succeeds inexplaining many cross-sectional differences in cor-porate finance, critics argue that these broad cate-gories belie the true complexity of a nation’s legalsystem. The US and UK economies serve as a goodexample. While both countries belong to the same‘‘Anglo-Saxon’’ model of corporate governance,describing their legal environment solely as com-mon law ignores differences in formal and informal‘‘rules of the game’’ that may significantly impactthe forms and efficacy of corporate governancemechanisms in the two countries. Consistent withthis notion, Short & Keasey (1999) suggest thatmanagers in the UK become entrenched at higherownership levels than managers in the US. Theyattribute this difference to better monitoring andfewer firm-level takeover defenses in the UK. Bru-ton et al. (2010) and Cumming &Walz (2010) showthat performance outcomes of ownership concen-tration and retained ownership by private equityinvestors may differ depending on the legal systemand institutional characteristics of the privateequity industry in a specific country.Characteristics of Boards of Directors, such as
goals, structure and representation may likewise beexpected to differ across institutional contexts,even within broad institutional categories.Wymeersch (1998), for example, finds that in some
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countries, the law does not specifically dictate therole of the board of directors, so its priorities maywell differ from the typical shareholder wealthmaximization. Regarding board structure, somejurisdictions have two-tier boards while others haveunitary boards. Rose (2005) suggests that the uni-tary (or one-tier) boards are typically from commonlaw nations and two-tier boards predominate incivil law nations, however, Danish firms haveadopted aspects of both. Moreover, O’Hare (2003)suggests that there may be an increase in oversightif firms with unitary systems change to a two-tierstructure. Regarding representation on boards,nations differ with regard to their take on thewisdom of including directors that are insidersversus outsiders (Adams & Ferreira, 2007) as well aslocal versus global (Masulis et al., 2012).
A large literature, much of it in the accountingfield, suggests that information environment,which includes the extent of corporate disclosure,reporting standards, the reliability of financialreporting, etc., is important to corporate gover-nance (Bushman, Piotroski, & Smith, 2004; Leuz &Wysocki, 2016). Corporate disclosure of informa-tion through publicly accessible accounting state-ments serves to enhance investor trust (Bushman &Smith, 2001). Much of this literature examines theuse of financial accounting in managerial incentivecontracts. This research has been examined in thecontext of takeovers (Palepu, 1986), boards ofdirectors (Anderson et al., 2004), shareholder liti-gation (Skinner, 1994) and debt contracts (Smith &Warner, 1979). The worldwide adoption of Inter-national Financial Reporting Standards has been animportant development in this literature and hasmotivated research in this area. The positive impactof enhancing reporting standards around the globeis arguably evidence consistent with the notionthat disclosure is an important mechanism incorporate governance.
Related to both the finance and accountingliterature, the legal structure in a nation plays acentral role in corporate governance of firms.Though firms may adapt to poor legal environ-ments individually (Coase, 1960), research suggeststhat regulation leads firms to develop good gover-nance. Mandatory disclosure can serve to reveal thetrue quality of a firm overall, and even managers atthat firm (Wang, 2010). Firms can opt into regula-tory environments by bonding to external legalenvironments that enhance legal requirements(e.g., with cross-listing) or opt out through goingprivate, delisting or even foreign incorporation.
Much of this literature examines changes in regu-lation in the US such as Regulation Fair Disclosureand Sarbanes–Oxley, but there are some interna-tional studies, such as Leuz, Nanda, & Wysocki(2003) and Dyck & Zingales (2004) that corroboratethe positive association between corporate gover-nance and a legal system that mandates disclosure.Some studies highlight the costs of regulation, bothdirect and indirect (e.g., Coates & Srinivasan,2014), suggesting that the mandatory nature ofdisclosure is not as straightforward as its relation tocorporate governance might imply.To summarize, prior law, economics, finance and
IB studies not only explore efficiency and effective-ness of various governance practices, but alsoidentify significant national differences in howthese practices are implemented at the firm level.In the following sections, we take this collectivebody of research a step further and discuss hownational differences may facilitate or create barriersfor the mobility of governance practices acrossnational borders.
MOBILITY OF GOVERNANCEAn integration of the mainstream IB research withinstitutional theory from finance, law and eco-nomics, provides new interesting dimensions to thediscussion of corporate governance mobility. Tra-ditional IB studies have identified how differentforms of institutional distance may affect the wayMNCs tap into international factors markets anddevelop their strategies in terms of global diversi-fication of their product and services (Brouthers,2002; Tihanyi, Griffith, & Russell, 2005). What isnot clear, however, is how these institutionalfactors may affect the exporting of governanceand its implications.Given the predominant focus in extant literature
on internal, organizational aspects of corporategovernance, there is limited prior work on potentialroles of the firm’s institutional environments interms of their impact on the link between gover-nance factors, international business strategy andultimately performance. Aguilera & Jackson (2003),for example, suggest that because business organi-zations are embedded in different national institu-tional systems, they will experience divergentdegrees of internal and external pressures to imple-ment a range of governance mechanisms that aredeemed efficient in a specific national context.Therefore contrary to the universalistic predictionsof agency-grounded research, different social,
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political and historic macro-factors may lead to theinstitutionalization of very different views of firms’role in society as well as what strategic actions andtheir outcomes should be considered as acceptable.
More recent sociology-grounded research sug-gests that governance is a product not only ofcoordinative demands imposed by market effi-ciency, but also of rationalized norms legitimizingthe adoption of appropriate governance practices(Bell et al., 2014). Legitimacy is the ‘‘generalizedperception or assumption that the actions of anentity are desirable, proper, or appropriate, withinsome socially- constructed system of norms, values,beliefs, and definitions’’ (Suchman, 1995, p. 574).This perspective focuses less attention on theindividual efficiency outcomes of structural gover-nance characteristics that are at the core of agencyperspective, and instead concentrates more ontheoretical efforts to understand how governancemechanisms affect the firm’s legitimacy throughperceptions of external assessors, or the stakeholder‘‘audiences’’.
Research within institutional theory and socialpsychology fields differentiates between varioustypes of legitimacy judgments that include, inaddition to instrumental (pragmatic), also cogni-tive and moral dimensions. More specifically,institutional theorists predict that regulative, nor-mative and cognitive institutions put pressure onfirms to compete for resources on the basis ofeconomic efficiency. However, institutional pres-sures may also compel firms to conform to expectedsocial behavior and demands of a wider body ofstakeholders. In other words, the ability of organi-zation to achieve social acceptance will depend on,in addition to efficiency concerns, the ability of itsgovernance systems to commit to stewardshipmanagement practices, stakeholders’ interests, andsocietal expectations.
These theoretical arguments may have far-reach-ing implications for corporate governance in an IBcontext. First, the firm’s quest for legitimacy maylead to changes in its corporate governance prac-tices and processes. For example, some firms, inaddition to enhancing the monitoring capacity ofboards, may also incorporate stakeholder engage-ment mechanisms into their formal governancestructures by assigning responsibility for sustain-ability to the board and forming a separate boardcommittee for sustainability. Consistent with thisnotion, the co-determination system of corporateboards in Germany ensures that representatives ofkey stakeholders, including employees, have a
direct say in governance matters. A system ofremuneration that involves not only financialperformance benchmarks, but also factors associ-ated with longer-term sustainability may beanother governance factor contributing to morallegitimacy. Similarly, some companies introducewider performance criteria and definitions of risk intheir risk-movement systems that use non-financialindicators. Therefore unlike studies in finance,economics, and strategy fields, institutional frame-work considers corporate governance as an endoge-nous, socially-embedded mechanism that may behighly responsive to various legitimacy pressures(Filatotchev & Nakajima, 2014).These arguments shed new light on our notion of
internationally mobile corporate governance bysuggesting that firms may adjust their governancemechanisms strategically when venturing intooverseas factor and product markets. For example,Moore, Bell, Filatotchev, & Rasheed (2012) advancea comparative institutional perspective to explaincapital market choice by firms going public viainitial public offering (IPO) in a foreign market.Based on a sample of 103 US and 99 UK foreignIPOs during the period 2002–2006, they find thatinternal governance characteristics (founder-CEO,executive incentives, and board independence) andexternal network characteristics (prestigious under-writers, degree of venture capitalist syndication,and board interlocks) are significant predictors offoreign capital market choice by foreign IPO firms.Their results suggest foreign IPO firms select a hostmarket where its governance characteristics andthird party affiliations fit the host market’s institu-tional environment. The basis for evaluating suchfit is the extent to which isomorphic pressures existfor firm attributes and characteristics to meetlegitimacy standards in host markets. Thus differ-ences in internal governance characteristics andexternal ties are associated with strategic capitalmarket choices such that an increased fit results in ahigher likelihood of choosing one market overanother. In other words, when firms select betweendifferent stock markets for their foreign IPO, theytry to ‘‘import’’ governance standards that theyperceive as more legitimate by investors in aspecific market. These findings are particularlyimportant given that Syvrud, Knill, Jens, & Colak(2012) find that, on average, foreign IPOs result inless proceeds.Further, research by Bell et al. (2014) focuses
on legitimacy in the stock market, where investorperceptions of the foreign IPO firm’s overall
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legitimacy fall at the intersection of the cognitiveand regulatory institutional domains. Thesedomains are aligned with the firms’ governancebundle and its home country legal environment,respectively. IPO firms originating from countrieswith institutional environments granting weakminority shareholder protections, such as Chinaor Russia, will have to adopt a larger number ofgovernance practices to gain the same level oflegitimacy as IPOs from strong governance juris-dictions. This international mobility of firm- andmacro-level governance factors can go both ways.
In a more recent paper, Krause, Filatotchev, &Bruton (2016) observe that institutional character-istics of foreign product markets influence thestructure of boards of directors of US firms activein these markets. They argue that allocating greater,outwardly visible power to the CEO will build thefirm’s legitimacy among customers who are cultur-ally more comfortable with high levels of powerdistance. Scholars rarely conceptualize boards astools firms can use to manage product markets’demand-side uncertainty, but the results of thisstudy suggest they should. Further, existingresearch in comparative corporate governance(e.g., Aguilera & Jackson, 2003) has argued thatnational institutions affect firm-level governancemechanisms, but this research also focuses almostexclusively on home country institutions. Clearly,institutional characteristics of foreign product mar-kets can also have an effect on a firm’s governance,even if the firm is incorporated and headquarteredin the United States.
To summarize, the legitimacy perspective suggestsnovel dimensions to the notion of corporate gover-nancemobility. From the agency perspective, MNCsmay export/import corporate governance to obtainaccess to superior resources and achieve efficiencyoutcomes. For example, by importing foreign direc-tors, firms in emerging markets can gain access toenhanced managerial expertise and monitoringcapabilities that may help them to be more compet-itive in an international market (Giannetti, Liao, &Yu, 2015). In addition, from an institutional per-spective, MNCs may adjust their governance sys-tems to adhere to expectations and governancestandards in a foreign product and factor markets,and therefore increase their legitimacy among localstakeholders, including investors and customers.These two perspectives differentiating between effi-ciency and legitimacy are not orthogonal, and theextent of governance mobility is determined by acomplex interplay of firm- and industry-level
factors, as well as financial, legal and cognitiveinstitutions in the home and host countries.Institutional factors may also create significant
barriers for corporate governance mobility. In termsof formal institutions, differences in national gov-ernance regulations may impede a transfer ofgovernance practices across national borders. Forexample, until recently the Chinese governmentimposed restrictions on foreign ownership of localcompanies that had a limiting effect on how muchinfluence Western institutional investors may havewhen deciding on various governance matters.Differences in informal institutions, such as cul-ture, may also create barriers for the transfer ofgovernance when, for example, imported gover-nance practices are not considered locally as legit-imate. Cultural differences influence governancenot only directly, but also indirectly through itsinfluence over time in shaping institutions. Forexample, culture can influence governance andother managerial decision-making through beliefsor values that influence individual agents’ percep-tions, preferences, and behaviors. As a result,culture ultimately affects the utilities of agent’schoices, both at the individual level and-as frictionsare always present-at the firm and national levels,when local players may have difficulties adoptingbest governance practices due to behavioral andcognitive biases. Culture also affects governanceand managerial decision-making by influencingnational institutions, which can be viewed as apath-dependent result of cultural influences andhistorical events (David, 1994). Recent examplessurround governance tensions in Japan, China andother South-East Asia economies between localinvestors on one hand, and foreign board membersand CEOs coming from the Western economies,indicating that cultural differences may createbarriers for the transfer of ‘‘good governance’’concepts that local participants in corporate gover-nance mechanisms find difficult to accept.Although our emphasis here was on how institu-tional factors may facilitate the transfer of corpo-rate governance, institutional barriers to thistransfer represent an important but relatively lessexplored area.
SPECIFIC MODES OF TRANSFERRINGGOVERNANCE
If the firm-level corporate governance structuresand their organizational outcomes in terms ofstrategies and performance are institutionally
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embedded, then the extent of governance mobilityas well as its effects on exporting/receiving firms isfar from universal. They may depend on institu-tional differences in home/host locations. Exactlyhow institutional factors affect the mobility ofcorporate governance and its implications dependson firm-level corporate governance, the mode(s) inwhich corporate governance is transferred, and theinstitutional environments from and to whichgovernance is transferred.
The mobility of governance depends on themechanisms used partly because there is differen-tial evidence on the extent to which governancecan be learned, copied, or imitated. Consistent withthis notion, Doidge, Karolyi, & Stulz (2007) findsignificant heterogeneity in firm-level corporategovernance within countries. Prior research hasshown that investors themselves learn about thevalue of governance, and as such the returns toinvestment based on governance disappear overtime. Indeed, Subramanian (2004) shows that theadvantages to incorporating in Delaware differacross small versus large firms and disappear overtime (counter to Daines, 2001). Bebchuk, Cohen, &Wang (2013) show that the value of the Gomperset al. (2003) governance index in predicting stockreturns over time disappears as investors learnabout the value of such governance; that is, theprice of well governed stocks goes up and thereturns go down. Nevertheless, while investorsappear to learn about the value of governance, itis difficult for some firms to observe, learn, andadopt best practices in governance due to differ-ences in internal process of the firm, behavioral andcognitive biases which limit the ability to copy well(Amin & Cohendet, 2000; Klapper & Love, 2004).Learning is local, requires skill acquisition, accli-mation to the right mindset, interactions with theright people, and a thirst for external reputation.Also, learning requires overcoming bad gover-nance. For example, Romano (2005) suggests thatthere are mistakes made by policymakers whenthey adopt minimum governance standards. Policyimplications on governance standards is a partisantopic, however. Involved in these policies are twocontroversial topics: globalization versus national-ization, and government involvement in the cor-porate world. The law and economics/financeliterature is fairly consistent in their conclusionthat legal institutions, both public and private (LaPorta et al., 2006; Jackson & Roe, 2009; Cumming,Knill, & Richardson, 2015), are good for firm accessto capital and financial development in general.
Consistent with this notion, policymakers who findthis research compelling should support legislationsupporting the exporting or importing of goodcorporate governance, especially in nations wherelegal institutions are lacking.At the same time, fairly recent events, such as the
Great Recession, ‘‘Brexit’’ in the UK and an increasein the popularity of nationalism among citizens insome nations have moved some policymakers totake a more protective stance with regard to foreignownership. As international trade and capital flowscontract, the International Monetary Fundacknowledges that globalization is not withoutrisks. Taking into consideration both of thesetrends, it is difficult to discuss with any specificityglobal policy implications.In this Special Issue, the papers comprise analyses
of four types of international transfer of corporategovernance: international M&As (Ellis et al., 2017;Renneboog et al., 2017), foreign investors (Aguileraet al., 2017; Calluzzo et al., 2017, foreign politicalconnections (Sojli & Tham, 2017) and foreigndirectors (Miletkov et al., 2017).The popularity of the international M&A litera-
ture has been growing markedly over time. Figure 1shows that articles that reference internationalbusiness in general have declined over time relativeto articles that reference international acquisitions,shareholder rights, and creditor rights. Some keypapers in the literature on international M&As andrelated topics of loans and creditor rights aresummarized in Table 1. Esty & Megginson (2003),Bae & Goyal (2009), Haselmann, Pistor, & Vig(2010), Cumming, Lopez-de-Silanes, McCahery, &Schwienbacher (2015), and Qi, Roth, & Wald(2017) show that loan structures and debt tranch-ing depend significantly on creditor rights andshareholder rights. In turn, international M&As,which are often financed with significant leverage,depend on access to debt finance and internationallevels of creditor and investor protection. Bris &Cabolis (2008) and Martynova & Renneboog (2008)find evidence that the cross border mergers have ahigher impact on target firms share prices incountries with better investor protection, and whenthe target is from a country of better investorprotection. In the context of leveraged buyouts(LOBs), however, Cao, Cumming, & Qian (2014)find evidence that cross-border LBOs are morecommon from strong creditor rights countries toweak creditor rights countries. Further, LBO premi-ums are lower in countries with stronger creditorrights and lower among cross-border deals. Cao,
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Cumming, Goh, & Qian (2015) show that theimpact of country-level investor protection on dealpremiums is stronger for LBO than non-LBOtransactions.
Two papers in this Special Issue contribute to thisliterature on cross-border M&As. Ellis et al. (2017)show that acquirers benefit from good countrygovernance, such that the acquirer’s stock pricereaction to acquisitions increases with the countrylevel governance distance between the acquirer andthe target. Renneboog et al. (2017) examine theimpact of M&As on bondholders. Bondholderreturns are larger in countries with stronger creditorrights and more efficient claims enforcement.These papers are important, as they show that thecountry-level distance between the acquirer andtarget affects the magnitude of transfer of gover-nance, and this benefit is shared by shareholdersand bondholders alike.
Table 2 highlights key papers in the literature onforeign ownership, foreign political connections,and foreign directors. Figure 2 shows that thesetopics have been substantially increasing in popu-larity over time, in contrast to work on directorsmore generally for example, which has been in
relative decline in recent years. Foreign investorsfocus on different types of stocks, as shown in earlywork by Kang & Stulz (1997). Foreign investors donot destabilize markets (Choe, Kho, & Stulz, 1999).Foreign investment reduces the cost of capital(Stulz, 1999), and financial integration across coun-tries lowers transactions costs and greater economicwelfare (Martin & Rey, 2000), even though foreignmoney managers have transaction costs disadvan-tages (Choe, Kho, & Stulz, 2005). Foreign investorsincrease the expected value of private firms backedby venture capitalists (Cumming, Knill, & Syvrud,2016), The positive effect of foreign ownership onfirm value has been attributed to larger sharehold-ers and higher long term commitment and involve-ment of such shareholders (Douma, George, &Kabir, 2006); however, in some cases internationalownership is associated with deficient environmen-tal standards (Dean, Lovely, & Wang, 2009).Cross-listing enables foreign ownership, and
firms to bond to higher governance standardsabroad to take advantage of more stringent securi-ties laws in a host country’s capital markets (Coffee,2002; Doidge, Karolyi, & Stulz, 2004; Doidge et al.,2007; Karolyi, 2012; Pagano, Roell, & Zechner,
Figure 1 Google Scholar hits on international acquisitions, creditor rights, and related topics. This figure displays the number of
Google Scholar hits as a percentage of the hits in 2008 for different search terms: Acquisitions (54,100 hits in 2008), International
Acquisitions (290 in 2008), Creditor Rights (835 in 2008), Shareholder Rights (1380 in 2008), Shell Companies (288 in 2008), and
International Business (134,000 in 2008).
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Table
1Summary
ofliterature
oninternationalcreditorrights,debtfinance,andM&As
Author(s)
Sample
Data
source
Dependentvariables
Independentvariables
Main
findings
Esty&
Megginson
(2003)
495Project
Loan
Tranch
esin
61
Countries,
1980–2000
Dealogic
Loanware
LoanSyndicate
Size
andStructure
CreditorRights,Legality
Indices,
Institutional
InvestorRatings,
Maturity,
Refinancing,Guarantees,
EmergingMarketBond
Spreads,
SectorVariables
Lenders
structure
loansyndicatesto
facilitate
monitoring
andlow-cost
re-contractingin
countrieswhere
creditors
have
strongandenforceable
legalrights.In
contrast,
lenders
attemptto
deterstrategic
defaultsbycreating
largerandmore
diffuse
syndicateswhentheycannot
resort
tolegalenforcementmech
anismsto
protect
their
claim
s
Bris&
Cabolis
(2008)
39Countries,
1989–2002,Cross-
borderM&A
Secu
ritiesData
Corporation(SDC)
Cumulative
Abnorm
al
ReturnsforAcq
uirer
andTargetFirm
s
CreditorRights,
ShareholderRights,
Corruption,Accounting
Standards,
Cash
Payment,
Firm
-SpecificVariables,
MarketConditions
Variables
Theannouncementeffect
ofacross-bordermergerfor
thetargetfirm
ishigher–relative
toamatching,
domestic
acq
uisition–thebettertheshareholder
protectionandtheaccountingstandardsin
theco
untry
oforigin
oftheacq
uirer.Thisresultisonly
significantin
acq
uisitionswhere
theacq
uirerbuys100%
ofthetarget,
andtherefore
where
thenationalityofthetargetfirm
changes.
Inaddition,thisresultisonly
significantwhen
theacq
uirerco
mesfrom
amore-protectiveco
untry,
whichsuggeststhattargetfirm
savo
idadoptingweaker
protectionviaprivate
contracting.There
isnota
symmetric
effect
ontheacq
uirer’sreturn.Allin
all,
the
evidence
supportstheview
thatthetransferofbetter
corporate
governance
practicesthroughcross-border
mergers
ispositively
valuedbymarkets
withweaker
corporate
governance
Martynova
& Renneboog
(2008)
29Countries,
1993–2001,Cross-
borderM&A
Secu
ritiesData
Corporation(SDC)
Cumulative
Abnorm
al
ReturnsforAcq
uirer
andTargetFirm
s
Difference
betw
een
CreditorRights
and
ShareholderRights
for
TargetandBidderNations,
Firm
-SpecificVariables,
MarketConditionVariables
Whenthebidderisfrom
aco
untrywithastrong
shareholderorientation(relative
tothetarget),part
of
thetotalsynergyvalueofthetakeovermayresultfrom
theim
provementin
thegovernance
ofthetargetassets.
Infulltakeovers,theco
rporate
governance
regulationof
thebidderisim
posedonthetarget(thepositive
spillover
bylaw
hypothesis).In
partialtakeovers,theim
provement
inthetargetco
rporate
governance
mayoccurona
voluntary
basis(thespilloverbyco
ntrolhypothesis).The
data
corroborate
both
spillovereffects.In
contrast,when
thebidderisfrom
aco
untrywithpoorershareholder
protection,thenegative
spilloverbylaw
hypothesis
statesthattheanticipatedtakeovergainswillbeloweras
thepoorerco
rporate
governance
regim
eofthebidder
will
beim
posedonthetarget.Thealternative
bootstrappinghypothesisarguesthatpoor-governance
bidders
voluntarily
bootstrapto
thebetter-governance
regim
eofthetarget.Thedata
donotsupport
this
bootstrappingeffect
Law, finance, and the international mobility Douglas Cumming et al
131
Journal of International Business Studies
Table
1(Continued
)
Author(s)
Sample
Data
source
Dependentvariables
Independentvariables
Main
findings
Bae&
Goyal
(2009)
48Countries,
1994–2003
LoanPricing
Corporation(LPC)
LoanSize,Lo
an
Maturity,Lo
anSpread
overLIBOR
CreditorRights,
Enforcement,Other
CountryLevelLegal
Variables
Banks
respondto
poorenforceability
ofco
ntractsby
reducingloanamounts,shorteningloanmaturities,
and
increasingloanspreads.
While
strongercreditorrights
reduce
spreads,theydonotseem
tomatterforloansize
andmaturity.Overall,
weshow
thatvariationin
enforceability
ofco
ntractsmatters
agreatdealmore
to
how
loansare
structuredandhow
theyare
priced
Cumming
etal.(2015)
115Countries,
1995–2009
LoanPricing
Corporation(LPC)
NumberofLo
an
Tranch
es,
Spread
Betw
eenLo
an
Tranch
es
CreditorRights,
Enforcement,Other
CountryLevelLegal
Variables
Inadditionto
dealandborrowerch
aracteristics,legaland
institutionaldifferencesim
pact
both
theprobability
of
tranch
ingandthestructure
across
tranch
esofthesame
loan.Strongcreditorprotectionandefficientdebt
collectionleadto
alargersyndicatedloanmarket,
increase
loantranch
ingandreduce
tranch
espreads,
ultim
ately
promotingfirm
access
todebtfinance
Caoetal.
(2014)
Cross-borderLB
Os,
43co
untries,
1995–2007
Dealogic,Thomson
VentureXpert,
Djanko
vetal.(2007),
andLa
Portaetal.
(1998)andSpamann
(2010)
TotalCountryLevel
LBO
Volumeand
Cross-borderLB
O
Volume,Cross-border
LBOs,
ClubDeals,
PremiumsPaid
for
TargetRelative
to
PrevailingStock
Price
CreditorRights,
ShareholderRights,
Eco
nomic
Conditions,
ForeignDirect
Investment,
Firm
-LevelFinancial
Variables,
ClubDeals,
Industry
Conditions
Cross-borderLB
Oinvestmentismore
commonfrom
strongcreditorrights
countriesto
weakcreditorrights
countries.
Clubdealsare
less
commonin
countrieswith
strongercreditorrights,andless
commonin
cross-border
LBOs.LB
Opremiumsare
lowerin
countrieswithstronger
creditorrights,andamongcross-borderdeals
Caoetal.
(2015)
Cross-borderLB
Os
versusnon-LBO
M&As,
43
countries,
1995–2007
Dealogic,Thomson
VentureXpert,
Djanko
vetal.(2007),
andLa
Portaetal.
(1998)andSpamann
(2010)
Premium
Paid
for
TargetRelative
to
PrevailingStock
Price
CreditorRights,
ShareholderRights,
Eco
nomic
Conditions,
ForeignDirect
Investment,
Firm
-LevelFinancial
Variables,
ClubDeals,
Industry
Conditions
Targetshareholders’wealthgain
isM&Asishigherin
countrieswithbetterinvestorprotection.Theim
pact
of
investorprotectionontakeoverpremium
islargerforLB
O
thannon-LBO
transactions.
ClubLB
Osare
pricedlower
thannon-clubdealsafteraccountingforendogeneity
Ellisetal.
(2017)
Cross-border
M&As,
56
countries,
1990–2007
Secu
ritiesData
Company’s
(SDC)
GlobalMergers
and
Acq
uisitionDatabase,
Djanko
vetal.(2007),
andLa
Portaetal.
(1998)
Acq
uirerReturns
CreditorRights,
ShareholderRights,Other
Country-LevelGovernance
VariablesforAcq
uirerand
Target,Differencesin
CountryLevelGovernance
betw
eenAcq
uirerand
Target,Eco
nomic
Conditions,
Industry
Dummies
Acq
uirers
cantransport
thebenefits
from
goodco
untry
governance,so
thattheygain
more
from
acq
uiring
targets
withworseco
untrygovernance
thantheirown.
Theacq
uirer’sstock-price
reactionto
acq
uisitions
increaseswiththeco
untrygovernance
distance
betw
een
theacq
uirerandthetarget
Law, finance, and the international mobility Douglas Cumming et al
132
Journal of International Business Studies
2002). But the bonding explanation is incompleteas not all firms desire to cross-list (Coffee, 2002),and there is still a large effect of local nationalgovernance on firm value amongst firms that docross-list (Cumming, Hou, & Wu, 2017). Interna-tional adoption of other jurisdictions’ monitoringtechnology (Cumming & Johan, 2008) and regula-tions (Cumming, Johan, & Li, 2011) can enable theinternational transfer of governance and superiorstock market outcomes such as new listings andliquidity. Regulators adopt from other jurisdictionsmonitoring technology (Cumming & Johan, 2008)and regulations (Cumming et al., 2011) that enablesuperior governance and stock market outcomes.The mobility of governance is also facilitated by
the increasing internationalization of the investorbase. Specifically, global investors include sover-eign wealth funds (SWFs), such as United ArabEmirates’s Abu-Dubai Investment Authority. SWFsmay enforce governance standards in their portfo-lio firms that are different to the general gover-nance practices in a specific location (Knill, Lee, &Mauck, 2012). Moreover, SWFs have a differentialpreference for private firms without a stockexchange listing, particularly in countries withlower legal standards (Johan, Knill, & Mauck,2013), where the lack of transparency is suggestiveof greater agency problems. Once companiesbecome publicly listed, there is substantially moreinformation released to the market, depending onthe legal and cultural factors in a particular country(Boulton, Smart, & Zutter, 2017).Another mechanism that can transfer gover-
nance includes CEO migration. MNCs can exportmonitoring technology and similar practices acrossnational borders, and CEOs that have experience inforeign countries with stronger institutional envi-ronments may transfer knowledge about goodgovernance (Cumming, Duan, Hou, & Rees,2015). Generally, internal control systems andprocesses can be learned, therefore they are trans-ferable/exportable, particularly in the context ofemerging markets (Hoskisson, Eden, Lau, &Wright,2000; John & Senbet, 1998).Further, foreign directors represent another chan-
nel of governance mobility as they may bring goodgovernance standards from their home countries tothe focal firm, especially if it is located in a countrywith low governance standards (Giannetti et al.,2015). Foreign directors have been shown to pos-itively impact firm performance (Choi, Park, & Yoo,2007), particularly when foreign directors havehigher levels of foreign degrees and politicalT
able
1(Continued
)
Author(s)
Sample
Data
source
Dependentvariables
Independentvariables
Main
findings
Renneboog
etal.(2017)
Cross-border
M&As,
2000–2013
ThomsonReuters
Eikon,SDC,Zephyr,
andCapitalIQ
Databases,
Database,
Djanko
vetal.(2007),
andLa
Portaetal.
(1998),andSpamann
(2010)
Abnorm
alBond
Returns
CreditorRights,
ShareholderRights,
Eco
nomic
Conditions,
Industry
Dummies
Thebondholders
ofbiddingfirm
srespondmore
positively
todealsthatexpose
theirfirm
toajurisdiction
withstrongercreditorrights
andmore
efficientclaim
s
enforcementthroughco
urts.Theeffectsare
strongerfor
firm
swithhigherassetrisk,longermaturity
bonds,anda
higherlikelih
oodoffinancialdistress
Qietal.
(2017)
CapitalRaisingand
Expenditure
Decisions,
40
countries,
1980–2009
Worldscope,
InternationalFinancial
Statistics,
WorldBank.
Djanko
vetal.(2007),
andLa
Portaetal.
(1998)
DebtFinancing,
CapitalExpenditure
CreditorRights,
ShareholderRights,
Eco
nomic
Conditions,
Industry
Dummies
Creditorrights
are
associatedwithgreaterdebtfinancing
andinvestmentduringeco
nomic
downturns,
but
creditorrights
have
asignificantlysm
allereffect
during
expansions.
Thebeneficialeffectsofcreditorrights
duringrecessionsare
strongerforfirm
sthatare
more
likely
tohave
severe
shareholder-bondholderagency
problems.
Duringrecessions(relative
toexpansions)
strongcreditorrights
are
associatedwithasm
aller
declinein
netcapitalflows
Thistable
summarizestheliterature
onco
untry-levellegalco
nditions,
creditorrights,debtfinance,andcross-borderandinternationalM&As.
Mainfindingsare
quotedorparaphrased.
Law, finance, and the international mobility Douglas Cumming et al
133
Journal of International Business Studies
Table
2Summary
ofliterature
oninternationalownership
anddirectors
Author(s)
Sample
Data
source
Dependentvariables
Independentvariables
Main
findings
Kang&
Stulz
(1997)
Japan,1975–1991
Pacific-BasinCapital
MarketResearch
Center(PACAP)
ForeignOwnership,
Returns
Firm
-SpecificVariables,
MarketConditions
Foreigninvestors
donothold
nationalmarket
portfolio
sorportfolio
stiltedtowardsstockswith
highexpectedreturns.
Foreigninvestors
hold
disproportionately
more
sharesoffirm
sin
manufacturingindustries,
largefirm
s,andfirm
s
withgoodaccountingperform
ance,low
unsystematicrisk,andlow
leverage.Controlling
forsize,there
isevidence
thatsm
allfirm
sthat
export
more
firm
swithgreatershare
turnover,
andfirm
sthathave
ADRshave
greaterforeign
ownership
Choeetal.
(1999)
OrderandTradeData,
1993–1997,Korean
Publicly
ListedFirm
s
KoreaStock
Exch
ange,co
mpiled
bytheInstitute
of
Finance
andBanking
(IFB
)atSeoulNational
University
Trading,Order
Imbalances,
Returns,
Volatility
ForeignInvestors,Market
Conditions
There
ispositive
feedback
tradingandherdingby
foreigninvestors
before
theperiodofKorea’s
eco
nomic
crisis.Duringthecrisisperiod,herding
falls,andpositive
feedback
tradingbyforeign
investors
mostly
disappears.There
isnoevidence
thattradesbyforeigninvestors
hada
destabilizingeffect
onKorea’s
stock
market.In
particular,themarketadjustedquicklyand
efficientlyto
largesalesbyforeigninvestors,and
these
saleswere
notfollo
wedbynegative
abnorm
alreturns
Stulz
(1999)
Datastream,
1988–1998,37
Countries
Datastream
Notapplicable
–
correlations
Globalizationreducestheco
stofequitycapitalfor
tworeasons.
First,theexpectedreturn
that
investors
requireto
invest
inequityto
compensate
them
fortherisk
theybeargenerally
falls.Seco
nd,theagency
costswhichmake
ithard
andmore
expensive
forfirm
sto
raisefunds
beco
meless
important
Martin
&
Rey(2000)
Notapplicable
–
theoreticalmodel
Notapplicable
Notapplicable
Notapplicable
Financialintegrationacross
countriesleadsto
lowertransactionco
stsbetw
eentw
ofinancial
markets,whichtranslate
tohigherdemandfor
assets
issuedonthose
markets,higherasset
prices,
andgreaterdiversification.Financial
integrationbenefits
thelargest
eco
nomyofthe
integratedarea.Only
whentransactionco
sts
beco
mevery
smalldoesfinancialintegrationlead
torelocationofmarkets
inthesm
allest
eco
nomy
Law, finance, and the international mobility Douglas Cumming et al
134
Journal of International Business Studies
Table
2(Continued
)
Author(s)
Sample
Data
source
Dependentvariables
Independentvariables
Main
findings
Pagano
etal.
(2002)
1986–1998,European
andUSfirm
s
GlobalVantageand
Worldscopedatabases
Cross-listing,Firm
Perform
ance
Measures
(ROA,AssetGrowth,
Tobin’s
Q,Fo
reignSales,
etc
Cross-listing,Firm
Characteristics,
Regional
Variables,
Market
Conditions
In1986–1997,manyEuropeanco
mpanieslisted
abroad,mainly
onUSexch
anges,
while
the
numberofUSco
mpanieslistedin
Europe
decreased.Thech
aracteristicsandperform
ance
ofEuropeanco
mpaniesdiffersharply
depending
onwhethertheycross-listin
theUSorwithin
Europe.In
thefirstcase,co
mpaniestendto
be
high-tech
andexport-oriented,andpursuea
strategyofrapid
expansionwithnosignificant
leveraging.In
theseco
ndcase,co
mpaniesdonot
grow
more
thantheco
ntrolgroup,andincrease
theirleverageaftercross-listing.In
both
cases,
cross-listingco
mpaniestendto
belargeand
recentlyprivatizedfirm
s,andexpandtheirforeign
salesafterlistingabroad
Doidge
etal.
(2004)
40co
untries,
1995,
1997
Worldscope,and
Supplementary
Sources
Cross-Listing;Tobin’s
QCross-listing,Firm
Characteristics,
Regional
Variables,
Legal
Conditions,
Market
Conditions
Attheendof1997,foreignco
mpanieswith
sharescross-listedin
theUShadTobin’s
qratios
thatwere
16.5%
higherthantheqratiosofnon-
cross-listedfirm
sfrom
thesameco
untry.The
valuationdifference
isstatistically
significantand
reach
es37%
forthose
companiesthatliston
majorUSexch
anges,
evenafterco
ntrollingfora
numberoffirm
andco
untrych
aracteristics.
AUS
listingreducestheextentto
whichco
ntrolling
shareholders
canengagein
expropriationand
therebyincreasesthefirm
’sability
totake
advantageofgrowth
opportunities.
Growth
opportunitiesare
more
highly
valuedforfirm
s
thatch
oose
tocross-listin
theUS,particularly
those
from
countrieswithpoorerinvestorrights
Choeetal.
(2005)
OrderandTradeData,
1996–1998,Korean
Publicly
ListedFirm
s
KoreaStock
Exch
ange,co
mpiled
bytheInstitute
of
Finance
andBanking
(IFB
)atSeoulNational
University
TradePrices,
Cumulative
Abnorm
alReturns
ForeignInvestors,Market
Conditions
Foreignmoneymanagers
paymore
than
domestic
moneymanagers
whentheybuyand
receiveless
whentheysellformedium
andlarge
trades.
Thesample
averagedaily
trade-w
eighted
disadvantageofforeignmoneymanagers
isof21
basispoints
forpurchasesand16basispoints
for
sales.
There
isalsosomeevidence
thatdomestic
individualinvestors
have
anedgeoverforeign
investors.Theexplanationforthese
resultsisthat
pricesmove
more
against
foreigninvestors
than
against
domestic
investors
before
trades
Law, finance, and the international mobility Douglas Cumming et al
135
Journal of International Business Studies
Table
2(Continued
)
Author(s)
Sample
Data
source
Dependentvariables
Independentvariables
Main
findings
Deanetal.
(2009)
EquityJointVentures
(from
Macau,Taiw
an,
andHongKong)into
China,1993–1996
China’s
Foreign
Eco
nomic
Relations
andTrade,China
StatisticalYearbook,
ChinaEnvironmental
Yearbook
Locationofequityjoint
ventures
EnvironmentalStandards,
Levies,
andRegional
Characteristicsfor
Developmentand
Agglomeration
Resultsshow
equityjointventuresin
highly-
pollu
tingindustriesfundedthroughHongKong,
Macao,andTaiw
anare
attractedbyweak
environmentalstandards.In
contrast,EJVsfunded
from
non-ethnically
Chinese
sourcesare
not
significantlyattractedbyweakstandards,
regardless
ofthepollu
tionintensity
ofthe
industry.These
findingsare
consistentwith
pollu
tionhavenbehavior,butnotbyinvestors
from
highinco
meco
untriesandonly
inindustries
thatare
highly
pollu
ting
Douma
etal.
(2006)
1999–2000,India
Capitalin
e2000
ROAandTobin’s
QFo
reignownership,firm
-
specificco
ntrolvariables
Thepositive
effect
offoreignownership
onfirm
perform
ance
issubstantially
attributable
to
foreignco
rporationsthathave,onaverage,larger
shareholding,higherco
mmitment,andlonger-
term
invo
lvement
Ruigrok
etal.
(2007)
269Companiesonthe
SwissStock
Exch
angein
2003
SwissStock
Exch
ange
DirectorNationalityand
Gender
Education,Age,Family
Affiliation,Interlocking
Director,Tenure,Other
Affiliations
Whereasforeigndirectors
tendto
bemore
independent,womendirectors
are
more
likely
to
beaffiliatedto
firm
managementthroughfamily
tiesandthatforeigndirectors
hold
significantly
lowernumbers
ofdirectorshipsatotherSwiss
boards.Female
andforeigndirectors
alsodifferin
term
sofeducationalbackground,educational
level,ageandboard
tenure.Weco
ncludethatin
orderto
managediversityonco
rporate
boardsit
isim
perative
tounderstandthech
aracteristics,
qualifi
cationsandaffiliationsthatthese
directors
bringto
theboardroom
andthatitisim
portantto
take
nationalcircumstancesinto
accountrather
thanrelyingonresearchresultsfrom
other
countries
Choietal.
(2007)
457KoreanFirm
sand
1834firm
-years
from
1999–2002
ListedCompany
Database
ofthe
KoreanListed
Companies
Association,Financial
Supervisory
Service
andtheFairTrade
Commissionofthe
Koreangovernment,
andtheKoreanStock
Exch
ange
Tobin’s
QFo
reignInstitutional
Ownership,Fo
reign
Directors,Market
Conditions,
Firm
Level
ControlVariables
AftertheAsianfinancialcrisis,regulations
requiringoutsideindependentdirectors
were
implemented.Theeffect
offoreignindependent
directors
andforeigninstitutionalownership
on
firm
perform
ance
issignificantandpositive,
exceptonthesubsetoffirm
swithfamily
control
andch
aebolco
ntrolwhere
theeffect
is
insignificantornegative
Law, finance, and the international mobility Douglas Cumming et al
136
Journal of International Business Studies
Table
2(Continued
)
Author(s)
Sample
Data
source
Dependentvariables
Independentvariables
Main
findings
Rhee&
Lee(2008)
Korea,2000–2003
KoreaStock
Exch
ange
ForeignOwnership
DirectorEducation,Firm
SpecificControlVariables
Thegrowth
offoreignownership
ispositively
affectedifahigherproportionofoutsidedirectors
hold
advancedforeigndegrees,
ifahigher
proportionofoutsidedirectors
have
form
eror
currentaffiliationswithgovernmental
organizations,orifahigherproportionofoutside
directors
have
jobexperience
inthesame
industry
Masulis
etal.
(2012)
1988–2006,Fo
reign
Directors
inUS
Corporations
IRRC
(now
RiskM
etrics)
Directors
Database;Compustat
annualfilesand
geographic
segment
files
Acq
uirerReturnsin
Cross-
borderAcq
uisitions;
DirectorMeeting
Attendance;Earnings
Restatements;CEO
Compensation;ROA;
Tobin’s
Q;CARsaround
ForeignIndependent
DirectorAnnouncements
ForeignIndependent
Director(FID),FIR*
PercentageofSalesfrom
FID
HomeRegion,FID
on
AuditCommittee;Firm
-
SpecificControlVariables,
CountryLevelControl
Variables,
Market
Conditions
Inrecentyears,about13%
oflargeUSpublic
corporationshave
foreignindependentdirectors
(FIDs)
servingontheirboards.
FIDsbringboth
benefits
andco
ststo
firm
s.Consistentwithvalue
addedbyFIDsthroughtheirinternational
expertise,firm
swithFIDsmake
bettercross-
borderacq
uisitionswhenthetargets
are
from
the
homeregionsofFIDs.
However,indicative
of
FIDs’monitoringdeficienciesandadverseeffect
onco
rporate
governance,FIDsdisplaypoor
board
meetingattendance
reco
rds,
andfirm
s
withFIDsontheirboardstendto
paytheirCEOs
excessively
highco
mpensationandare
more
proneto
commitfinancialmisreportingthat
requiresfuture
restatements.Firm
swithFIDsare
associatedwithsignificantlypoorerperform
ance,
especially
whentheydonothave
much
business
presence
intheirFID’s
homeregion,butFIDs
make
increasingly
largerco
ntributionto
firm
perform
ance
asafirm
’soperationin
theFID’s
homeregionbeco
mesmore
important
Law, finance, and the international mobility Douglas Cumming et al
137
Journal of International Business Studies
Table
2(Continued
)
Author(s)
Sample
Data
source
Dependentvariables
Independentvariables
Main
findings
Knill
etal.
(2012)
900acq
uisitionsby
SWFs
overtheperiod
1984–2009
LexisNexis,SDC
Platinum
SWFInvestment/Amount
ofInvestment
Differencesin
Macroeco
nomic
Variables
(marketreturn,exch
ange
rate
return,GDPpcand
GDPgrowth),Correlation,
Geographic
Proxim
ity,
Anti-self-D
ealin
gIndices,
AccountingDisclosure
Indices,
TradeBlock
Membership
and
Democracy
Levels
Weexaminetherole
ofbilateralpoliticalrelations
insovereignwealthfund(SWF)
investment
decisions.
Ourempiricalresultssuggest
that
politicalrelationsplayarole
inSWFdecision-
making.Contrary
topredictionsbasedontheFD
I
andpoliticalrelationsliterature,wefindthat
relative
tonationsin
whichtheydonotinvest,
SWFs
preferto
invest
innationswithwhichthey
have
weakerpoliticalrelations.Usingatw
o-stage
Craggmodel,wefindthatpoliticalrelationsare
anim
portantfactorin
where
SWFs
invest
but
matterless
indeterm
ininghow
much
toinvest.
Inco
nsistentwiththeFD
Iandpoliticalrelations
literature,these
resultssuggest
thatSWFs
behave
differentlythanrationalinvestors
whomaxim
ize
return
while
minim
izingrisk.Consistentwiththe
tradeandpoliticalrelationsliterature,wefindthat
SWFinvestmenthasapositive
(negative)im
pact
forrelatively
closed(open)co
untries.
Ourresults
suggest
thatSWFs
use
–atleast
partially
–non-
financialmotivesin
investmentdecisions
Johan
etal.
(2013)
SWFinvestmentdata
from
50co
untries,
1984–2009
LexisNexis,SDC
Platinum
Investmentin
Private
versusPublic
Firm
s
LegalConditions,
Market
Conditions
SWFs
investments
are
more
oftenin
private
firm
s
whenthemarketreturnsoftargetnationsare
negatively
correlatedto
themarketreturnsofthe
SWFnations.
SWFs
are
more
likely
toinvest
in
private
firm
softargetnationswithweakerlegal
conditions,
andwhenthelegaldifferences
betw
eentheSWFco
untryandthetargetco
untry
are
more
pronounced.Thisevidence
isco
nsistent
withstrategic
rationalesforinvestmentand
potentialco
rporate
governance
conflicts
Giannetti,
etal.
(2015)
China,1999–2009
ChinaStock
Market&
AccountingResearch
Database
(CSMAR)
Tobin’s
Q,TotalFactor
Productivity,Return
on
Assets
ForeignOwnership,
ForeignExperience,Firm
ControlVariables,
Market
Conditions
Valuation,productivity,andprofitability
increase
afterfirm
shiredirectors
withforeignexperience.
Furtherm
ore,co
rporate
governance
improves
andfirm
sare
more
likely
tomake
international
acq
uisitions,
toexport,andto
raisefunds
internationally
Law, finance, and the international mobility Douglas Cumming et al
138
Journal of International Business Studies
Table
2(Continued
)
Author(s)
Sample
Data
source
Dependentvariables
Independentvariables
Main
findings
Cumming
etal.
(2016)
81Countries,
1995–2010
SDC
Platinum’s
VentureXpert,
Mergers
&
Acq
uisitions,
and
GlobalNew
Issues
databases
Probability
ofIPO,
Proceedsin
IPO,
Probability
ofAcq
uisition,
Acq
uisitionDealValue
ForeignInvestor,Legal
Conditions,
Market
Conditions,
Firm
-Specific
Governance
Variables
Relative
todealsin
whichtheinvestorbase
is
purely
domestic,private
firm
sthathave
an
internationalinvestorbase
have
ahigher
probability
ofexitingviaaninitialpublic
offering
(IPO)andhigherIPO
proceeds.
Theevidence
is
consistentwiththeview
thatwhile
thebenefitsof
internationalizationmaybedifficu
ltandco
stly
to
manage,forthose
firm
sthatsucceedin
managingcross-borderco
ordinationco
sts,
there
ispotentialvalueforanIPO
firm
.Thebenefits
relative
totheco
stsofinternationalizingthe
investorbase
forprivate
firm
ssold
inacq
uisitions,
byco
ntrast,are
much
less
pronounced.Themost
importantsourceofthisbenefitappears
tobe
access
tocapital
Miletkov
etal.
(2017)
80Countries,
2001–2011
OSIRIS
(Bureauvan
Dijk
Electronic
Publishing),
InternationalCountry
RiskGuide,Global
Competitiveness
Report,andtheWorld
Bank’sDoingBusiness
project
ForeignIndependent
Directors,Return
on
Assets
ForeignIndependent
Directors,QualityofLegal
Regim
e,Firm
Specific
FinancialandGovernance
Variables
Foreigndirectors
are
more
likely
tobeassociated
withfirm
sthathave
more
foreignoperationsand
aninternationalshareholderbase,andfirm
sthat
are
locatedin
countrieswithalim
itedsupply
of
potentially
qualifi
eddomestic
directors
–
countrieswithasm
aller,less
well-educated
populace
andlowerlevelsofcapitalmarket
development.Theassociationbetw
eenforeign
directorsandfirm
perform
ance
ismore
positive
in
countrieswithlowerqualitylegalinstitutions,and
whenthedirectorco
mesfrom
aco
untrywith
higherqualitylegalinstitutionsthanthefirm
’s
host
country
Callu
zzo
etal.
(2017)
SWFinvestmentdata
from
8co
untriesand
into
USfirm
s,
2005–2013
SovereignWealth
FundTransaction
Database
(SWFT
D)
providedbythe
SovereignWealth
FundInstitute
(SWFI),
FEC
MasterFiles
SovereignWealthFu
nd
Investment,Pre/Post
PoliticalContributions
InstitutionalOwnership,
Firm
-Specific
Characteristics
(market/book,
analysts,
financialstatistics,liq
uidity,
momentum),Pollu
tion,
PoliticalContributions
SWFs
are
attractedto
firm
sengagedin
US
campaignfinance.Firm
campaignfinance
contributionsincrease
afterSWFinvestment.SWF
attractionto
campaignfinance
firm
sincreases(1)
afteranexogenouslegalshock
thatlib
eralized
corporate
campaignfinance
activitiesand(2)in
a
subsetofindustriesvu
lnerable
torecent
legislationcapable
ofinhibitingorexpunging
foreigninvestment
Law, finance, and the international mobility Douglas Cumming et al
139
Journal of International Business Studies
Table
2(Continued
)
Author(s)
Sample
Data
source
Dependentvariables
Independentvariables
Main
findings
Aguilera
etal.
(2014)
ForeignInvestors
into
Japanese
Companies,
2006–2013
Japanese
Company
Handbook,
Nikkei
FinancialQuest,
TokyoStock
Exch
ange,Thomson
Eikon,Thompson
Worldscope,
Companyfinancial
statements,
Bloomberg
EarningsFo
recasts,
SurprisesErrors,Revisions
ForeignOwnership,
Domestic
Ownership,Past
Perform
ance,Prior
Optimism,Corporate
Governance
Proxies
Afteraddressingendogeneityco
ncerns,
inthe
presence
offoreignowners,managers
are
more
optimisticin
theirinitialearningsforecasts,butin
subsequentrevisionstheyare
more
likely
to
providetimely
adjustments
oftheirearnings
forecast
andavo
idmakinglast-m
inute
adjustment
Sojli
&
Tham
(2017)
China,Singapore,US,
1998–2013
SEC
13D
Filin
gs,
Web
Searches,
SWFRadar,
SWFInstitute,
AmadanInternational,
CompustatSegments
Cumulative
Abnorm
al
Return,Tobin’s
Q,
ForeignMarketAccess,
ForeignGovernment
Contracts
ForeignPolitical
Connections,
Government
RelatedContracts,
Firm
SpecificFinancialand
Governance
Variables
Foreignpoliticalco
nnectionscreate
largefirm
valueandim
prove
access
toforeignmarkets.One
ofthemain
channelsofvaluecreationis
governmentco
ntractsawardedto
firm
swith
direct
foreignpoliticalco
nnections
Boulton
etal.
(2017)
36Countries,
1998–2014
ThomsonFinancial
SDC
Platinum
New
Issues,
Thomson
FinancialSDC
Platinum
New
Issues
Database,Datastream
IPO
Underpricing
Country-level
Conservativism
,Firm
-
SpecificFinancialand
Governance
Measures,Law
andFinance
CountryLevel
Measures,
Eco
nomic
Conditions
IPOsaroundtheworldare
underpricedless
in
countrieswhere
existingpublic
firm
spractice
more
accountingco
nservatism
.Thelin
kbetw
een
conservatism
andunderpricingisrobust
to
alternative
measuresofco
nservatism
,co
untry
meanregressions,sampleco
untryexclusions,and
endogenoustreatm
entmodels.Consistentwith
thehypothesisthatco
nservatism
reduces
underpricingbymitigatingtheim
pact
of
inform
ationasymmetries,
higherco
untry-level
conservatism
isassociatedwithlowerco
untry-
levelprobability
ofuninform
ed-basedtrading
valuesandthatthenegative
relationbetw
een
conservatism
andunderpricingisstrongest
for
IPOsinvo
lvingsm
allfirm
swhere
inform
ation
asymmetriesare
likely
tobehigh.Litigationrisk
andlegalorigin,tw
ofactorslin
kedto
thepractice
ofco
nservatism
,influence
therelationbetw
een
underpricingandco
nservatism
Law, finance, and the international mobility Douglas Cumming et al
140
Journal of International Business Studies
connections (Rhee & Lee, 2008). There is somecontrasting evidence, however, that while foreigndirectors make better M&A decisions, they are lessoften engaged in firm activities thereby worseningperformance and requiring more earnings restate-ments, among other problems (Masulis et al., 2012).Four important papers in this Special Issue con-
tribute to the literature on foreign investors, foreigndirectors, and political connections. Aguilera et al.(2017) show that, in the presence of foreign investors,managers tend to be more optimistic in their earlyearnings forecasts, but have more long-term andtimely adjustments relatively and avoid making lastminute decisions. Calluzzo et al. (2017) show thatsovereign wealth funds are attracted to firms that aremore engaged in campaign finance, and hence canhave a political influence in the target firm’s country.Sojli & Tham (2017) show that foreign politicalconnections create large increases in firm value,improve access to foreign markets, and improveaccess to government contracts. Foreign boardmem-bers coming from countries with more advancedinstitutions may export good governance to a localfirm operating in a relatively less advanced institu-tional environment, and this improvement may bestronger when institutional differences between ‘‘ex-porting’’ and ‘‘importing’’ countries are high (Mile-tkov et al., 2017). These papers show that the identityof foreign owners is significant and may have inter-play with foreign directors and political connections,and can substantially influence the governance andperformance of firms in different institutional envi-ronments. All of these papers show that governance ismobile and a key competitive advantage.Last but certainly not least, it is important to note
that bad governance is also internationally mobile.Allred, Findley, Nielsen, & Sharman (2017) show thatmany firms flaunt international standards by settingup internationally shell corporations. Even amongOECD countries, there are substantial numbers ofshell companies that are not compliant with interna-tional standards. Tax haven based firms, by contrast,aremore compliantwith international standards. Thepopularity of research on shell companies is growingsignificantly (Fig. 1). Future research could continueto seek a better understanding of the causes andconsequences of these shell companies.
DISCUSSION AND CONCLUSIONSOur review of the literature suggests that mobilityof corporate governance is very context specific inrespect of the country level institutional conditionsT
able
2(Continued
)
Author(s)
Sample
Data
source
Dependentvariables
Independentvariables
Main
findings
Allred
etal.
(2017)
176Countries
Surveys,
Field
Experiment
Anonymous
Inco
rporation,
Compliance
withRules
InternationalLaw,
EnforcementandThreatof
Penalties,
Norm
sof
Appropriate
Behavior,Tax
Havens
Asubstantialnumberoffirm
sare
willingto
flout
internationalstandardswithanonymous
inco
rporationofshellco
mpanies.Those
inOECD
countriesprovedsignificantlyless
compliantwith
rulesthanin
developingco
untriesortaxhavens.
Firm
sin
taxhavensdisplayedsignificantlygreater
compliance
andwere
sensitive
toexperimental
interventionsinvo
kinginternationallaw
Thistable
summarizestheliterature
onco
untry-levellegal,politicalandcu
lturalco
nditions,
cross-borderownership,andinternationaldirectors.Main
findingsare
quotedorparaphrased.
Law, finance, and the international mobility Douglas Cumming et al
141
Journal of International Business Studies
as well as the mode of international governancetransfer. Insights into the causes and consequencesof firm-specific international governance transfercan be gleaned from interdisciplinary analysesinvolving law, finance, management and relatedfields. There is a massive scope for further work ontopic that makes use of these interdisciplinaryperspectives that we have highlighted here.
In this introduction, we specifically emphasizedfour main ways in which governance is interna-tionally mobile: international M&As, foreign inves-tors, foreign directors, and foreign politicalconnections. These related topics are the focus ofthe important papers in this Special Issue. As alimitation we note that these four channels are notthe only ways in which governance practices maybe transferred across countries. For example, priorstudies identify other channels of the transfer ofcorporate governance, such as the proliferation ofgovernance codes around the globe and the har-monization of accounting standards, which havebeen discussed in the related literature. Future IB
studies should develop a more holistic picture ofthe mobility of corporate governance by looking atthese diverse channels.Examining multi-stakeholder perspective may
reveal new important dimensions of the mobilityof corporate governance, bearing in mind that thetraditional view of corporate governance is heavilyanchored on mechanisms for solving agency prob-lems arising from conflicting interests between topmanagement and outside shareholders. Debatesabout US-based board governance, including itsoptimal size, composition, and independence, arelargely influenced by this convention. However,agency conflicts arising from other stakeholdershave implications for the design of corporate gover-nance intended to solve managerial agency prob-lems. For instance, in an environment where we alsohave debt agencyproblems (Djankov et al., 2008), anoptimally designed corporate board should repre-sent a balance between the interests of outsideshareholders and outside debtholders. Debtholderrepresentation on the board is observed frequently
Figure 2 Google Scholar hits on foreign directors, foreign shareholders, and related topics. This figure displays the number of Google
Scholar hits as a percentage of the hits in 2008 for different search terms: Directors (84,300 hits in 2008), Foreign Directors (84 in
2008), Shareholders (32,400 in 2008), Foreign Shareholders (438 in 2008), Political Connections (2370 in 2008), and Sovereign
Wealth Funds (1510 in 2008).
Law, finance, and the international mobility Douglas Cumming et al
142
Journal of International Business Studies
outside the U.S. and U.K. corporate sectors, andfuture research may explore how some elements ofthe multi-stakeholder governance model can betransmitted from one country to another withinthe context of MNE global operations.
The papers in this Special Issue highlight impor-tant managerial and policy implications associatedwith the mobility of governance. Internationalacquisitions benefit both acquirer and target firms,and particularly those firms with a greater institu-tional distance between them (Ellis et al., 2017;Renneboog et al., 2017). Foreign investors affectmanagerial behavior (Aguilera et al., 2017), and canhave a political influence (Calluzzo et al., 2017).Foreign political connections positively affect firmvalue (Sojli & Tham, 2017). Foreign directors canpositively affect firm value, particularly in countrieswith weak legal standards (Miletkov et al., 2017).The only negative aspect of mobility of governanceis seen with the establishment of shell companiesthat are common and not compliant with interna-tional standards (Allred et al., 2017). Policymakersshould work to encourage mobility of governance.At the same time, regulators could further cooper-ate to enforce international standards to preventimproper governance standards from being trans-ferred across countries. Given recent events such asthe Global Financial Crisis and all of its implica-tions, this balance in policy could prove particu-larly challenging.
The impact of financial regulation on governanceis particularly important in the contest of financialfirms. To the extent that countries and regions varyin terms of regulatory schemes, the governancestructure varies accordingly. Again, this is oneexample where the interaction between multipleagents and stakeholders matters in the design andmobility of governance. In fact, the design of bankmanagement compensation and its incentive fea-tures play a vital role in the design of optimalbanking regulation (John, Saunders, Senbet, 2000).Traditional banking regulation focuses on a two-party game with conflicting interests between thebank and the regulator.However, bankmanagementis the key decision maker, and the bank risk
incentives depend on the incentive structure ofbankmanagement compensation. John et al. (2000)show that, if these incentive features (e.g., bonus,salary, equity participation) are an input to thepricing of deposit insurance, an optimal bankingregulation can be designed. Thus, the transmissionmechanisms for governance mobility are broaderwhen financial firms are considered. They arisefrom cross-border regulation and regulatorycoordination.In addition, development partners, as well as
international financial institutions, such as the IMFand World Bank, can be transmission sources ofgovernance for developing economies. This arisespartly through technical assistance in financialsector development programs, but extends intonon-financial firms as well. The quality of corporategovernance is among the design features in thereform of financial systems in developing countries.This suggests an interesting research question intothe relationship between governance and financialdevelopmentwith a focus on low income countries.To conclude, this Special Issue poses important
questions for corporate governance researchers inall of the respective fields, including IB, finance,economics, accounting and law. With the growingscale and scope of internationalization of businessactivities, the challenges facing executives in theglobal arena are considerably more demandingthan those encountered in a domestic environ-ment. The global context increases the diversity ofstakeholders whose interests must be considered aswell as the complexity of the governance problemsfacing MNCs and their leaders. Furthermore, com-panies competing in the global marketplace face afundamental dilemma – how to balance the needfor global consistency in corporate governancepractices with the need to be sensitive to thedemands and expectations of local stakeholders(Filatotchev & Stahl, 2015). Finding the appropriatebalance between these competing demands is notalways easy, and papers in this Special Issue help tomap out future research directions in this increas-ingly important field.
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ABOUT THE AUTHORSDouglas Cumming JD., Ph.D., CFA, is a Professorof Finance and Entrepreneurship and the OntarioResearch Chair at the Schulich School of Business,York University. Douglas has published over 140articles in leading refereed academic journals infinance, management, and law and economics,such as the Academy of Management Journal, Journalof Financial Economics, Review of Financial Studies,Journal of Financial and Quantitative Analysis, andthe Journal of Empirical Legal Studies, and authoredand edited over a dozen books with Oxford andWiley, among others. He is the Founding Editor ofAnnals of Corporate Governance, and Co-Editor ofFinance Research Letters, and Entrepreneurship Theoryand Practice, and has been a guest editor fornumerous Special Issues of top journals. Douglas isthe incoming Editor-in-Chief of the Journal ofCorporate Finance, effective 2018. Douglas’ workhas been reviewed in numerous media outlets,including the Wall Street Journal, The Economist, TheNew York Times, Canadian Business, the Globe andMail, the National Post, and The New Yorker.
Igor Filatotchev is Professor of Corporate Gover-nance and Strategy at City, University of London,and Visiting Professor at Vienna University of Eco-nomics and Business. His research interests arefocused on institutional aspects of corporate gov-ernance and sociology of capital markets, and hehas published more than 130 refereed papers inthese fields, including in leading journals such asAcademy of Management Journal, Strategic Manage-ment Journal, Organization Science, Journal of Inter-national Business Studies, Journal of Corporate Finance,and Journal of Management. He is a General Editor ofJournal of Management Studies. He earned a Ph.D. inEconomics from the Institute of World Economyand International Relations, Moscow, the RussianFederation.
April Knill is the Gene Taylor/Bank of AmericaProfessor of Finance and the Associate Director ofthe BB&T Center for Perspectives on Free Enterpriseat The Florida State University. She received herPh.D. from the University of Maryland at CollegePark in August of 2005. While pursuing her doc-toral degree she worked at The World Bank as aconsultant. Upon graduation, she went to work atFlorida State University. Her research interests areinternational finance, venture capital/privateequity, and the intersection between law, financeand politics. She has published in academic jour-nals including (but not limited to) Journal of Busi-ness, Journal of Financial and Quantitative Analysis,Journal of International Business Studies, FinancialManagement, European Financial Management, Jour-nal of Corporate Finance, Journal of Comparative Eco-nomics and Journal of Financial Intermediation.
David Mitchell Reeb is Mr. and Mrs. Lin Jo YanProfessor of Banking and Finance and a Professor inthe Department of Finance at National Universityof Singapore (NUS) Business School. Dr Reeb‘sresearch focuses on family-controlled, publicly-tra-ded firms and encompasses financial markets andfinancial disclosure choices. His work has appearedin the Journal of Finance, Journal of Financial Eco-nomics, Journal of Accounting and Economics, Ac-counting Review, Administrative Science Quarterly,Journal of Law and Economics, and the Journal ofInternational Business Studies. Professor Reeb hasserved as a department editor at the Journal ofInternational Business Studies. He was a finalist forthe Battle Price Best Paper in Corporate Finance(2003), by American Finance Association.
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Lemma Senbet is the Executive Director of AfricanEconomic Research Consortium and on leave fromthe University of Maryland as the William E. MayerChair Professor of Finance. He has achieved globalrecognition for his extensive and widely citedcontributions to corporate and internationalfinance, which have appeared in such premierjournals as Journal of Finance, Review of FinancialStudies, and Journal of Business. He has been electedtwice as director of the American Finance Associa-tion and is a past president of the Western FinanceAssociation. He has been appointed to over a dozen
journal editorial boards, including extendedtenures with the Journal of Finance (12 years), Jour-nal of Financial and Quantitative Analysis (6 years),and Financial Management (18 years). In 2006 hewas named Editor (Finance), JIBS, and he served fiveyears. He has advised the World Bank, the IMF, theUN, African Development Bank, and various gov-ernmental and private agencies in USA, Canada,and Africa on issues relating to financial sectorreforms and capital market development.
Accepted by John Cantwell, Editor-in-Chief, 12 December 2016. This article was single-blind reviewed.
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