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Equilibrium in Corporate Governance: Effects in Developing Countries

Equilibrium in Corporate Governance: Effects in Developing Countries

Sonia Marcos, Luis A. Castrillo
Copyright: © 2020 |Pages: 19
ISBN13: 9781522596073|ISBN10: 1522596070|ISBN13 Softcover: 9781522596080|EISBN13: 9781522596097
DOI: 10.4018/978-1-5225-9607-3.ch007
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MLA

Marcos, Sonia, and Luis A. Castrillo. "Equilibrium in Corporate Governance: Effects in Developing Countries." Corporate Governance Models and Applications in Developing Economies, edited by Otuo Serebour Agyemang, et al., IGI Global, 2020, pp. 114-132. https://doi.org/10.4018/978-1-5225-9607-3.ch007

APA

Marcos, S. & Castrillo, L. A. (2020). Equilibrium in Corporate Governance: Effects in Developing Countries. In O. Agyemang, A. Ansong, & B. Agyei-Mensah (Eds.), Corporate Governance Models and Applications in Developing Economies (pp. 114-132). IGI Global. https://doi.org/10.4018/978-1-5225-9607-3.ch007

Chicago

Marcos, Sonia, and Luis A. Castrillo. "Equilibrium in Corporate Governance: Effects in Developing Countries." In Corporate Governance Models and Applications in Developing Economies, edited by Otuo Serebour Agyemang, Abraham Ansong, and Ben Kwame Agyei-Mensah, 114-132. Hershey, PA: IGI Global, 2020. https://doi.org/10.4018/978-1-5225-9607-3.ch007

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Abstract

Corporate governance systems around the world are shaped by legal traditions, but the most important determinant of their effectiveness is law enforcement. Developing countries tend to have weak institutional structures and contracting environments. In this context, markets are inefficient and ownership concentration becomes the main corporate governance mechanism in order to protect property rights. How can developing countries design an optimal corporate governance system in their poor business environments? Corporate governance mechanisms are interdependent, and each country needs to search for a set of mechanisms in equilibrium—that is, an optimal combination of control and incentives—that solves its own agency problems. But another problem in developing countries is the lack of public enforcement. Just as internal mechanisms may substitute for ineffective external mechanisms, private initiatives may reinforce weak public enforcement.

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