A review of corporate governance effectiveness: Developed vs emerging markets

Omair Haroon ORCID logo, Maliha Zaka



In recent years, a thriving academic debate evaluating the trend of convergence in corporate governance regulations around the world (Samanta, 2020) has taken place. Academics and practitioners question the transplantation of corporate governance regulatory environment, typically from the developed world to emerging countries, without much consideration for local economic and business environment and culture. Based on a review of empirical studies published in high-quality journals from 2001 to 2021, we synthesize evidence related to the effectiveness of corporate governance mechanisms in developed markets compared to emerging markets. We focus on benefits accruing from these mechanisms in reducing agency costs of firms in terms of improved accounting performance, market valuation, and financial reporting quality of firms. We find that only a few governance mechanisms, for example, board diversity, family management, and equity-based compensation for top management are effective in reducing agency conflicts and promoting good governance. Other governance-improving tools seem to vary in terms of the degree of effectiveness in developed and emerging markets. The analysis suggests that cultural, political, economic, and legal features of an economy should be considered carefully by policy makers and regulators while adapting corporate governance regulations from developed economies in emerging markets.

Keywords: Corporate Governance, Emerging Markets, Regulatory Transplant, Corporate Performance, Earnings Management

Authors’ individual contribution: Conceptualization — O.H.; Methodology — O.H. and M.Z.; Investigation — O.H. and M.Z.; Writing — Original Draft — O.H. and M.Z.; Writing — Review & Editing — O.H. and M.Z.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: G3, L2, M4

Received: 08.03.2022
Accepted: 28.02.2023
Published online: 03.03.2023

How to cite this paper: Haroon, O., & Zaka, M. (2023). A review of corporate governance effectiveness: Developed vs emerging markets. Corporate Law & Governance Review, 5(1), 38–62. https://doi.org/10.22495/clgrv5i1p4

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