Effects of Environmental and Organizational Factors on Corporate Governance Practices

Abstract

The management literature provides four different approaches to explain the relationships between groups inside a company: Shareholder Theory, Stakeholder Theory, Agency Theory, Corporate Governance. This paper firstly discusses the theories and subsequently focuses on corporate governance practices. Having investigated the relevant literature, it is concluded that there are some variables that might affect the success of implementation process. These internal and external variables have come together in different ways to create a range of corporate governance systems that reflect specific market structures, legal systems, traditions, regulations, and cultural and societal values. The paper focuses on the effects of corporate culture, firm size and emerging markets and crises on corporate governance practices. It argues that some relationships might exist between design variables of corporate governance application and a firm’s internal and external characteristics; there is no one “best” way to apply a corporate governance system. It is concluded that the success of corporate governance depends on the conditions under which it is employed.