International Corporate Governance
Introduction
Corporate governance, which is set out by many different mechanisms, has been thought by many to be a large factor in determining future success of a business in terms of its profitability and/or relative market value (just several metrics to measure success by). Secondly, the extent to which these mechanisms affect corporate decisions is a significant area of interest. This initial journal article (Diane K. Denis and John J. McConnell, 2003) sets out these different mechanisms: Board of directors, executive pay, ownership structure, takeover market, and the legal system. It then analyses, through many exterior research journals, the degree to which this is relevant in countries across the world, …show more content…
It states that corporate governance would be expected to be significantly different in these two countries due to the conflicting cultures. “The Japanese system is usually characterized as bank and relationship oriented, and the U.S. system as (stock) market orientated”. Several points were concluded through this study. Firstly, compensation in Japan is more sensitive to negative earnings than the U.S. Secondly, compensation of the top executives in Japan seem to be less closely linked to stock performance than in the U.S. These results are in line with preliminary predictions as it shows that the U.S. corporate system is generally more stock market …show more content…
Studies linking the concentration of shareholders and firm performance have found positive results of such corporate structures. For instance, Gorton and Schmid (2000) looked at the performance of German firms in relation to the concentration of equity ownership and found that there is, in fact, a positive correlation between the two factors. However, with this study it is thought that because the stock market was not the main institution (the bank was), this slightly takes away from the overall validity. Another journal article coming to the same conclusion is that of Classens and Djankov (1999) who looked at “a cross section of 706 Czech firms over the period 1992 through 1997”. From the research they carried out, the conclusion drawn was that the relationship between the level of concentration of ownership and the firm’s profitability/labour productivity was positive. Therefore supporting the argument that these blockholders can be a positive addition. The one downside to this research, however, is the fact that it was conducted quite a long time ago (research data between 1992 and 1997), again, detracting from the study’s applicability to today’s
Introduction
Corporate governance, which is set out by many different mechanisms, has been thought by many to be a large factor in determining future success of a business in terms of its profitability and/or relative market value (just several metrics to measure success by). Secondly, the extent to which these mechanisms affect corporate decisions is a significant area of interest. This initial journal article (Diane K. Denis and John J. McConnell, 2003) sets out these different mechanisms: Board of directors, executive pay, ownership structure, takeover market, and the legal system. It then analyses, through many exterior research journals, the degree to which this is relevant in countries across the world, …show more content…
It states that corporate governance would be expected to be significantly different in these two countries due to the conflicting cultures. “The Japanese system is usually characterized as bank and relationship oriented, and the U.S. system as (stock) market orientated”. Several points were concluded through this study. Firstly, compensation in Japan is more sensitive to negative earnings than the U.S. Secondly, compensation of the top executives in Japan seem to be less closely linked to stock performance than in the U.S. These results are in line with preliminary predictions as it shows that the U.S. corporate system is generally more stock market …show more content…
Studies linking the concentration of shareholders and firm performance have found positive results of such corporate structures. For instance, Gorton and Schmid (2000) looked at the performance of German firms in relation to the concentration of equity ownership and found that there is, in fact, a positive correlation between the two factors. However, with this study it is thought that because the stock market was not the main institution (the bank was), this slightly takes away from the overall validity. Another journal article coming to the same conclusion is that of Classens and Djankov (1999) who looked at “a cross section of 706 Czech firms over the period 1992 through 1997”. From the research they carried out, the conclusion drawn was that the relationship between the level of concentration of ownership and the firm’s profitability/labour productivity was positive. Therefore supporting the argument that these blockholders can be a positive addition. The one downside to this research, however, is the fact that it was conducted quite a long time ago (research data between 1992 and 1997), again, detracting from the study’s applicability to today’s