Institutional determinants of good corporate governance: Evidence from emerging economy

Abstract

Economic globalization has encouraged debate on the differences and similarities between national corporate governance (CG) systems. However, in today’s world, it is pivotal to study how (and to what extent) is CG shaped by institutional environments both at national and firm level? Consequently, this study seeks to explore key institutional determinants of good CG practices in Pakistan. Drawing on the lenses of agency and institutional theories, the study conceptualizes CG practices and structures as institutionally resolute and directed. The study adopts a qualitative research methodology and found that CG models, particularly in developing countries, are irrelevant if they are not institutionally grounded and explicated. In particular, the study explores the extent to which certain underlying formal and informal institutional determinants, such as the auditing, political, legal, board, shareholders awareness, voting, culture and values play a determining role in corporate governance. The study emphasized the necessity to revisit the foundation of institutional and agency theories in the environment of developing countries. The study also suggests the reassessment of the implication of executives in agency theory literature concerning developing countries, relying on the general lack of knowledge by shareholders with respect to their rights.