International Corporate Governance and Finance: Legal, Cultural and Political Explanations

Hamadi Matoussi and Maha Khemakhem Jardak

The International Journal of Accounting, 2012, vol. 47, issue 1, 1-43

Abstract: We investigate the disparity and the determinants of investor protection around the world and their impact on financial market development. More specifically, we build on Williamson's (2000) new institutional economic model to explain this disparity using legal, political and cultural variables. In 2006, the World Bank established an index to measure the disparity of investor protection regulations across 81 emerging and developed countries. Our results confirm that combining classifications based on legal systems, cultures and polities is important in explaining the disparity of investor protection and market capitalization around the world. In particular, we show that the classical regression analysis is not well suited to approach this question because it gives mitigated results. However, the mediation analysis is more cohesive with our conceptual model: we confirmed an indirect effect through a path analysis involving investor protection as a mediator of the relationship between legal systems and culture on the one hand and stock market capitalization on the other hand. Nevertheless, the polity factor was shown to have only a direct effect on stock market capitalization.

Keywords: International corporate governance; Investor protection; Culture dimension; Legal system; Political system; Mediation analysis; Financial markets (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (9)

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Working Paper: International Corporate Governance and Finance: Legal, Cultural and Political Explanations (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:accoun:v:47:y:2012:i:1:p:1-43

DOI: 10.1016/j.intacc.2011.12.001

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