Chapter 2. Global Perspective

After reading this chapter, you will be able to:

  • Develop a deeper appreciation for the legal foundation and influences of local law on enterprise governance.

  • Compare global governance and compliance requirements for multinational enterprises.

Influencing Governance Structures

As the twenty-first century opened, the world seemed to be discovering the impact of globalization on governance. The debate focused on the impact of local government regulation on governance. By 2004, Art Durnev and Kim Han announced to the 14th Annual Conference on Financial Economics and Accounting (FEA) that:

For many countries in the world, there is relatively little empirical evidence on governance mechanisms other than legal protection and ownership structure. Such issues as board structure, compensation, and changes in control have been extensively studied in the U.S. but have been studied much less—if at all—for many other world economies. This may reflect the dominant role of ownership structure in these economies, a dominance that appears to be driven at least in part by weaknesses in legal systems. Evolutions in legal structure provide for natural corporate governance experiments. Financial globalization reduces the importance of country characteristics, thereby increasing the incentives for good governance.[6]

In the light of the rapid growth of the intertwined global economy, research into governance structures has been aggressively viewed by researchers, investors, and ...

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