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Diffusion of regulatory innovations: the case of corporate governance codes

Published online by Cambridge University Press:  01 December 2016

CARSTEN GERNER-BEUERLE
CARSTEN GERNER-BEUERLE*
Affiliation:
Law Department, London School of Economics and Political Science, London, UK
*
*Email: [email protected]
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Abstract

Since the 1990s, most European countries have adopted detailed corporate governance codes regulating listed companies. Even though the initial codes were designed against the backdrop of a particular jurisdiction, best practice standards have become remarkably similar across legal traditions. This raises the question whether the codes are sufficiently responsive to local conditions, or standard setters are mainly motivated by the concern not to fall behind internationally accepted benchmark standards. The article quantifies central corporate governance provisions and maps their international diffusion. Controlling for differences in legal families and ownership structure, the article shows that the diffusion of best practice standards leads to a statistically significant increase in the likelihood that a foreign standard setter will adopt a broadly similar provision. The findings indicate that codes are often seen as signaling devices, irrespective of whether or not the adopted standards are well aligned with the domestic economic and legal environment.

Type
Research Article
Information
Journal of Institutional Economics , Volume 13 , Issue 2 , June 2017 , pp. 271 - 303
Copyright
Copyright © Millennium Economics Ltd 2016 

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