Informal Institutions, Societal Values and Corporate Governance: A Test of Williamson’s (2000) Model of the Derivation of Corporate Governance Outcomes.
This paper examines the relationship between national societal values and corporate governance outcomes for a sample of 23 emerging markets. Using Williamson’s (2000) framework and Hofstede’s (1980, 2001) societal values constructs, we find that after controlling for the multiple dimensions of economic, legal, and institutional factors, national societal values still have significant explanatory power for the variations in corporate governance outcomes. Using the firm-level governance survey data by Credit Lyonnais Securities Asia (CLSA), corporate governance scores are shown to be higher in countries with more individualistic societal values and lower in countries with stronger uncertainty avoidance and/or more achievement orientation societal values. We extend the emerging international business literature by showing that societal values are an important determinant of the extant patterns of corporate governance and should be considered in cross-national studies of corporate decisions.