Anglo‐American versus Asian Corporate Governance Environments

• Date: 01 July 2012
• Published date: 01 July 2012
• Author: William Judge
• DOI: http://doi.org/10.1111/j.1467-8683.2012.00919.x

Editorial

Anglo-American versus Asian Corporate

Governance Environments

William Judge

Editor in Chief

Any student of the f‌ield of corporate governance knows

that the vast majority of the scholarly literature has

previously examined corporate governance antecedents and

effects in the United States by American scholars. While

interest and research has blossomed in United Kingdom,

that governance environment has many similarities to the

American one. Fortunately, this emphasis on governance in

the Anglo-American context is beginning to diversify, and

governance scholars trained and living in other countries are

now examining governance dynamics in non-Anglo-

American governance environments (Durisin & Puzone,

2009). This diversif‌ication of governance environments

studied by a wider array of governance scholars is a good

thing for the f‌ield, and our journal is ambitiously seeking to

parlay this diversif‌ication into a global perspective on com-

parative corporate governance, not just an Anglo-American

one.

As fate would have it, half of the empirical studies in this

issue are focused on Anglo-American governance environ-

ments and the other half of the empirical studies are focused

on Asian governance environments. As a result, this issue

offers a unique glimpse into the very different governance

practices and outcomes in the east and west.

Our lead article in this issue was authored by Kaczmarek,

Kimino, and Pye and it examines board task-related fault-

lines in UK f‌irms. For those who are not familiar with this

term, a “faultline” is a demographic split or schism within a

working group that challenges the group’s effectiveness.

Unlike traditional board composition research, faultline

research considers how relatively homogeneous sub-groups

based upon sub-group members’ alignment along their

multiple attributes can decrease group effectiveness (Lau &

Murnighan, 1998). Using social identity theory coupled with

the group effectiveness literature, Kaczmarek and associates

found that board task-related faultlines are generally associ-

ated with lower levels of f‌inancial performance in FT350

f‌irms. Furthermore, they f‌ind that board busyness and CEO

tenure exacerbates the negative relationship between board

faultlines and f‌inancial performance. Interestingly, they also

report that incentive compensationarrangements ameliorate

the negative relationship between board faultlines and f‌irm

performance. Overall, this study suggests that board com-

position and group dynamics systematically inf‌luence f‌inan-

cial performance in large f‌irms based in the United

Kingdom.

Our second article was conducted by Asian accounting

scholars interested in learning more about the antecedents

and effects of auditor choice for f‌irms operating in the

United States. Using agency theory, Liu and Lai posit that

f‌irms that are organizationally complex will generate higher

levels of information asymmetry which can be partially miti-

gated by working with high quality and reputable auditing

f‌irms. Specif‌ically, they theorize and f‌ind that the greater the

organizational complexity of the US f‌irm, the more benef‌i-

cial a high quality auditing f‌irm is. Using multiple measures

of organizational complexity, audit quality and f‌irm value,

this study f‌inds that this relationship is fairly robust.

Our third article redirects attention to boardroom dynam-

ics and outcomes in Japanese f‌irms. Specif‌ically,Nakano and

Nguyen hypothesize that board size will be negatively asso-

ciated with corporate risk taking. Previous research in

Anglo-American economies has generally demonstrated a

negative relationship between board size and corporate risk

taking (e.g., Cheng, 2008). However, Anglo-American

boards are dominated by outside directors while Japanese

boards are dominated by inside directors. Furthermore, the

Japanese institutional environment is quite different. As

such, it is not clear whether this negative relationship would

hold up in the Japanese context. Based on a relatively recent

sample of large, publicly-held Japanese f‌irms, the datareveal

that the relationship between board size and corporate risk

taking is not as strong in Japan as it is in the United States.

However, when investment opportunities are considered,

this relationship holds for f‌irms with relatively limited

investment opportunities (but it does not hold for f‌irms

confronted with extensive investment opportunities). These

335

Corporate Governance: An International Review, 2012, 20(4): 335–336

© 2012 Blackwell Publishing Ltd

doi:10.1111/j.1467-8683.2012.00919.x