The Multiple Levels of Analysis Involved with Corporate Governance Studies

• DOI: http://doi.org/10.1111/j.1467-8683.2010.00835.x
• Date: 01 January 2011
• Author: William Judge
• Published date: 01 January 2011

Editorial

The Multiple Levels of Analysis Involved with

Corporate Governance Studiescorg_8351..2

By William Judge

In our continuing quest to move towards a global theory

of corporate governance, this first issue of 2011 reminds

us that corporate governance mechanisms do not operate at

a single level of analysis. For example, our leadoff article by

Chen explores the relationship between national level gov-

ernance mechanisms and cash holdings at the firm level. In

this international sample of 15,648 firms spread throughout

47 countries from 1996 to 2007, this study demonstrates that

strong security laws and regulations as well as strong anti-

corruption laws and regulations work to reduce cash hold-

ings in firms throughout the world. In addition, this study

demonstrates that excess cash is negatively associated with

firm value. As such, this study suggests that a global theory

of corporate governance must account for national level dif-

ferences in the effective enforcement of national laws and

regulations.

However, our next two studies suggest that there are also

considerable differences within nations in terms of corporate

governance mechanisms and effectiveness. This might be

particularly true for emerging economies. For example, Xu,

Zeng, and Zhang explore the potential for tax enforcement

differences at the provinciallevel within China might impact

the market performance of the firm. In their sample of 917

Chinese listed firms during the period of 2003 to 2006, Xu

and associates empirically demonstrate that there are con-

siderable differences in tax enforcement across the 35 prov-

inces of China. More importantly, they demonstrate a

systematic relationship between effectiveness of taxenforce-

ment at the provincial level and firm performance, which

suggests that the government tax authorities function as

effective monitors of a firm’s behavior in China. In addition,

this study demonstrates that this relationship is especially

strong in state-controlled firms.

Immediately following that study, Boytsun, Deloof, and

Matthyssens provide us with their empirical study of corpo-

rate governance within the country of the Ukraine. Similar

to the previous study, they examine differences at the pro-

vincial level. Unlike the previous study, they seek to under-

stand the role that community social norms and community

social cohesion have on corporate governance practices. In

their examination of 803 firms, they find that social norm

strength has a direct and indirect impact on corporate gov-

ernance at the firm level. In other words social norm

strength appears to directly influence corporate governance,

as well as indirectly influence corporate governance through

social cohesion strength. As such, this study reminds us that

corporate governancemechanisms not only consist of formal

laws and regulations, but also social norms and values. In

addition, these social norms and values can vary across, but

also within, national boundaries.

Our fourth article in this issue seeks to understand how

corporate governance mechanisms influence restructuring

in businesses that have been acquired previously. This study

by Abor, Graham, and Yawson examines 649 US-listed firms

which completed acquisitions during the period of 1991

until 2001. Then, they seek to understand how corporate

governance arrangements within the acquiring firm influ-

enced subsequent employment and divestiture decisions

within five years after the acquisition. Notably,they find that

some corporate governance mechanisms, in the form of

board composition, ownership, and managerial incentives,

are generally related to employment changes, but not to

divestiture decisions.

Our final article by Gimeno, Mateos de Cabo, and Escot

seek to identify what the antecedents of gender diversity

might be for the top 1,000 Spanish boards from 2005 until

2008. Spain is appropriate because it possesses one of the

lowest representations of women in its boards among the

developed economies. Indeed, they report on average, that

there are .37 women on boards of 5.53 members throughout

Spain. Interestingly, they find that firm age, family owner-

ship, women on previous boards, and gender diversity

within the primary industry to all be positively associated

with gender diversity within the boards in question. Using

discrimination theory, Gimeno and associates demonstrate

that gender diversity within the boardroomin Spain is influ-

enced by discrimination as well as lack of candidates to

select from and corporate inertia.

As can been seen by these five studies, the antecedents

of corporate governance as well as the effects operate on

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Corporate Governance: An International Review, 2011, 19(1): 1–2

© 2011 Blackwell Publishing Ltd

doi:10.1111/j.1467-8683.2010.00835.x