Skip to main content
SpringerLink
Log in

The impact of institutional changes on corporate governance mechanisms in transition economies

  • Published:
Journal of Management & Governance Aims and scope Submit manuscript

Abstract

We examine how institutional changes affect corporate governance in transition economies. We develop a transition model that specifies three stages of the transition process including the early, intermediate, and late. We develop a framework for assessing the effectiveness of widely recognized corporate governance mechanisms (CGMs) in and across these stages. Our general proposition is that as transition economies move from early, to intermediate, to late stages, effective CGMs tend to be those that are based on state administrative control power, social networks and private orders, and market forces and formal institutions, respectively. Our study has contributions and implications regarding the transition economies and the impacts of institutions on corporate governance.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Similar content being viewed by others

References

  • Aguilera, R. B., & Jackson, G. (2003). The cross-national diversity of corporate governance: Dimensions and determinants. Academy of Management Review, 28, 447–465.

    Google Scholar 

  • Baysinger, B. D., & Hoskisson, R. E. (1989). Diversification strategy and R&D intensity in multiproduct firms. Academy of Management Journal, 32, 310–332.

    Article  Google Scholar 

  • Berger, S., & Dore, R. (1994). National diversity and global capitalism. Ithaca, NY: Cornell University Press.

  • Berglof, E. (1995). Corporate governance in transitional economies: The theory and its policy implications. In M. Aoki & H. K. Kim (Eds.), Corporate governance in transitional economies: Insider control and the role of banks (pp. 59–98). Washington, DC: The World Bank.

    Google Scholar 

  • Black, B. S., Kraakman, R., & Tarassova, A. (2000). Russian privatization and corporate governance: What went wrong. Stanford Law Review, 52, 1731–1808.

    Article  Google Scholar 

  • Bloom, M., & Milkovich, G. T. (1998). Relationships among risk, incentive pay, and organizational performance. Academy of Management Journal, 41, 283–297.

    Article  Google Scholar 

  • Boisot, M., & Child, J. (1988). The iron law of fiefs: Bureaucratic failure and the problem of governance in the Chinese economic reforms. Administrative Science Quarterly, 33, 507–527.

    Article  Google Scholar 

  • Chan, H. K., Lin, K. Z., & Zhang, F. (2007). On the association between changes in corporate ownership and changes in auditor quality in a transitional economy. Journal of International Accounting Research, 6, 19–36.

    Article  Google Scholar 

  • Daily, C. M., Dalton, D. R., & Cannella, A. A. (2003). Corporate governance: Decades of dialogue and data. Academy of Management Review, 28, 371–382.

    Google Scholar 

  • Dalton, D. R., Daily, C. M., Ellstrand, A. E., & Johnson, J. L. (1998). Meta-analytic reviews of board composition, leadership structure, and financial performance. Strategic Management Journal, 19, 269–290.

    Article  Google Scholar 

  • Dharwadkar, R., George, G., & Brandes, P. (2000). Privatization in emerging economies: An agency theory perspective. Academy of Management Review, 25, 650–669.

    Article  Google Scholar 

  • DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48, 147–160.

    Article  Google Scholar 

  • Dyck, A. (2001). Privatization and corporate governance: Principles, evidence, and future challenges. The World Bank Research Observer, 16(1), 59–84.

    Article  Google Scholar 

  • Eggersston, T. (1990). The role of transaction costs and property rights in economic analysis. European Economic Review, 34, 450–457.

    Google Scholar 

  • Eisenhardt, K. M. (1988). Agency-and institutional-theory explanations: The case of retail sales compensation. Academy of Management Journal, 31, 488–511.

    Article  Google Scholar 

  • Eisenhardt, K. M. (1989). Agency theory: An assessment and review. Academy of Management Review, 14, 57–75.

    Article  Google Scholar 

  • Fama, E. F. (1980). Agency problems and the theory of the firm. Journal of Political Economy, 88, 288–307.

    Article  Google Scholar 

  • Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. Journal of Law and Economics, 26, 301–325.

    Article  Google Scholar 

  • Filatotchev, I., Hoskisson, R. E., Buck, T., & Wright, M. (1996). Corporate restructuring in Russian privatization: Implications for U.S. investors. California Management Review, 38, 87–105.

    Google Scholar 

  • Filatotchev, I., Isachenkova, N., & Mickiewicz, T. (2007). Corporate governance, managers’ independence, exporting, and performance of firms in transition economies. Emerging Markets Finance and Trade, 43, 62–77.

    Article  Google Scholar 

  • Finkelstein, S., & D’Aveni, R. A. (1994). CEO duality as a double-edged sword: How boards of directors balance entrenchment avoidance and unity of command. Academy of Management Journal, 37, 1079–1108.

    Article  Google Scholar 

  • Firth, M., Fung, P., & Rui, O. M. (2006). Firm performance, governance structure, and top management turnover in a transitional economy. Journal of Management Studies, 43, 1289–1330.

    Article  Google Scholar 

  • Gulati, R., & Singh, H. (1998). The architecture of cooperation: Managing coordination costs and appropriation concerns in strategic alliances. Administrative Science Quarterly, 43, 791–814.

    Article  Google Scholar 

  • Hillman, A. J., & Dalziel, T. (2003). Boards of directors and firm performance: Integrating agency and resource dependence perspectives. Academy of Management Review, 28, 383–396.

    Google Scholar 

  • Hoskisson, R. E., Eden, L., Lau, C. M., & Wright, M. (2000). Strategy in emerging economies. Academy of Management Journal, 43, 249–267.

    Article  Google Scholar 

  • Hoskisson, R. E., & Hitt, M. A. (1990). Antecedents and performance outcomes of diversification: A review and critique of theoretical perspectives. Journal of Management, 16, 461–509.

    Article  Google Scholar 

  • Jensen, M. C. (1986). Agency costs of free cash flow, corporate finance, and takeovers. American Economic Review, 76, 323–329.

    Google Scholar 

  • Jensen, M. C. (1993). The modern industrial revolution, exit, and the failure of internal control systems. The Journal of Finance, 48, 831–880.

    Article  Google Scholar 

  • Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3, 305–360.

    Article  Google Scholar 

  • Jensen, M. C., & Smith, C. W. (2000). Stockholder, manager, and creditor interests: Application of agency theory. Theory of firm: Governance, residual claims and organizational forms. Cambridge, MA: Harvard University Press.

  • Jones, G. R., & Butler, J. E. (1992). Managing internal corporate entrepreneurship: An agency theory perspective. Journal of Management, 18, 733–749.

    Article  Google Scholar 

  • King, L. P. (2001). The basic features of post communist capitalist, in Eastern Europe: Firms in Hungary, the Czech Republic, and Slovakia. Westport, CT: Praeger.

    Google Scholar 

  • Kosnik, R. D. (1990). Effects of board demography and directors’ incentives on corporate greenmail decisions. Academy of Management Journal, 32, 163–185.

    Google Scholar 

  • Kroll, M. J., Wright, P., Toombs, L. A., & Leavell, H. (1997). Form of control: Critical determinant of acquisition performance and CEO rewards. Strategic Management Journal, 18, 85–96.

    Article  Google Scholar 

  • Kuznetsova, O. (1999). The state as a shareholder: Responsibilities and objectives. Europe-Asia Studies, 51, 433–445.

    Article  Google Scholar 

  • Lai, L., & Tam, H. (2007). Independent directors and the propensity to smooth earnings: A study of corporate governance in China. The Business Review, 7, 328–335.

    Google Scholar 

  • La Porta, R., Lopez de Silanes, F., & Shleifer, A. (1998). Corporate ownership around the world. Journal of Finance, 54, 471–517.

    Article  Google Scholar 

  • Martin, R. (2002). Politicized managerial capitalism: Enterprise structures in post-socialist Central and Eastern Europe. The Journal of Management Studies, 39, 823–839.

    Google Scholar 

  • McCarthy, D., & Puffer, S. (2002). Corporate governance in Russia: Towards a European, US, or Russian Model? European Management Journal, 20, 630–640.

    Article  Google Scholar 

  • McMillan, J., & Woodruff, C. (2000). Private order under dysfunctional public order. Michigan Law Review, 98, 2421–2458.

    Article  Google Scholar 

  • Moran, D. (1999). Benefits transfer and how flow alleviation: What lesions for environmental valuable in the UK? Journal of Environmental Planning and Management, 42, 425–437.

    Google Scholar 

  • Morck, R., Shleifer, A., & Vishny, R. W. (1988). Management ownership and market valuation: An empirical analysis. Journal of Financial Economics, 20, 293–315.

    Article  Google Scholar 

  • Morck, R., Shleifer, A., & Vishny, R. W. (1989). Alternative mechanisms for corporate control. The American Economic Review, 79, 842–852.

    Google Scholar 

  • North, D. C. (1990). Institutions, institutional change and economic performance. Cambridge, MA: Harvard University Press.

    Google Scholar 

  • Oscasio, W. (1999). Institutionalized action and corporate governance: The reliance on rules of CEO succession. Administrative Science Quarterly, 44, 384–416.

    Article  Google Scholar 

  • Ouchi, W. G. (1979). A conceptual framework for the design of organizational control mechanisms. Management Science, 25, 833–848.

    Article  Google Scholar 

  • Peng, M. W. (2000). Business strategies in transition economies. Thousand Oaks, CA: Sage.

    Google Scholar 

  • Peng, M. W. (2003). Institutional transitions and strategic choices. Academy of Management Review, 28, 275–296.

    Article  Google Scholar 

  • Pfeffer, J., & Salancik, G. (1978). The external control of organizations: A resource dependence perspective. New York: Harper and Row.

    Google Scholar 

  • Prowse, S. (1995). Corporate governance in an international perspective: A survey of corporate control mechanisms among large firms in the United States, the United Kingdom, Japan and Germany. Cambridge, MA: Blackwell.

    Google Scholar 

  • Shleifer, A. (1994). Establishing property rights. World Bank Research Observer, Annual Conference Supplement, 93–117.

  • Shleifer, A., & Vishny, R. (1997). A survey of corporate governance. Journal of Finance, 52, 737–783.

    Article  Google Scholar 

  • Suhomlinova, O. O. (1999). Constructive destruction: Transformation of Russian state-owned construction enterprises during market transition. Organization Studies, 20, 451–483.

    Article  Google Scholar 

  • Tufano, P. (1998). Agency costs of corporate risk management. Financial Management, 27, 67–77.

    Article  Google Scholar 

  • Williamson, O. E. (1985). The economic institutions of capitalism: Firms, markets, relational contracting. New York, NY: The Free Press.

    Google Scholar 

  • Williamson, O. E. (1995). The institutions and governance of economic development and reform. In Proceedings of the World Bank Annual Conference on Development Economics 1994 (pp. 171–197). Washington, DC: World Bank.

  • World Bank. (2002). World development report: Building institutions for markets. Washington: World Bank.

    Google Scholar 

  • Young, M. N., Peng, M. W., Ahlstrom, D., & Bruton, G. D. (2002). Ownership structure and corporate governance: Can we generalize from US evidence? Best Paper Proceedings, Academy of Management Annual Meeting.

Download references

Author information

Authors and Affiliations

  1. Department of Management and Information Systems, College of Business, Louisiana Tech University and National University of Vietnam, PO Box 10318, Ruston, LA, 71272, USA

    Son A. Le

  2. Department of Management and Information Systems, College of Business, Louisiana Tech University, PO Box 10318, Ruston, LA, 71272, USA

    Mark J. Kroll

  3. Department of Management and Information Systems, College of Administration and Business, Louisiana Tech University, PO Box 10318, Ruston, LA, 71272, USA

    Bruce A. Walters

Authors
  1. Son A. Le
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Mark J. Kroll
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Bruce A. Walters
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Son A. Le.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Le, S.A., Kroll, M.J. & Walters, B.A. The impact of institutional changes on corporate governance mechanisms in transition economies. J Manag Gov 14, 91–114 (2010). https://doi.org/10.1007/s10997-008-9075-4

Download citation

  • Received:

  • Revised:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10997-008-9075-4

Keywords

Search

Navigation