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Compliance with corporate governance codes in emerging economies. How do Romanian listed companies “comply-or-explain”?

Compliance with corporate governance codes in emerging economies. How do Romanian listed... Purpose – The aim of this study is to examine the attitude of Romanian companies listed on the Bucharest Stock Exchange towards the “comply-or-explain” principle, under which they fulfill their corporate governance obligations. Design/methodology/approach – We design and use five indexes to investigate the compliance of Romanian listed companies with their corporate governance obligations, and the quality of their explanations in case of non-compliance under the “comply-or-explain” principle. Further, we perform additional analyses by firm characteristics to identify the more compliant companies. Findings – Our results point to the difficulties in the application of the “comply-or-explain” principle approach to corporate governance in emerging economies. First, applicable laws and regulations in these countries deter themselves the application of this principle, by the confusions and unclear provisions that they contain. Second, these countries are characterized by low enforcement mechanisms and less demanding users of information. These create an environment where local companies get away with unsanctioned non-compliance instances, and general type of explanations. However, our results suggest that larger, first-tier companies with larger boards have better corporate governance practices. Research limitations/implications – The small number of companies listed on the Bucharest Stock Exchange prevented advanced statistical treatment of data. Originality/value – We fill a gap in literature by providing, to our knowledge, the first study that addresses the case of corporate governance practices based on the “comply-or-explain” principle in Romania (one of the recent members of the European Union), and one of the few studies addressing the case of Central and Eastern European countries. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Corporate Governance Emerald Publishing

Compliance with corporate governance codes in emerging economies. How do Romanian listed companies “comply-or-explain”?

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1472-0701
DOI
10.1108/CG-07-2013-0095
Publisher site
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Abstract

Purpose – The aim of this study is to examine the attitude of Romanian companies listed on the Bucharest Stock Exchange towards the “comply-or-explain” principle, under which they fulfill their corporate governance obligations. Design/methodology/approach – We design and use five indexes to investigate the compliance of Romanian listed companies with their corporate governance obligations, and the quality of their explanations in case of non-compliance under the “comply-or-explain” principle. Further, we perform additional analyses by firm characteristics to identify the more compliant companies. Findings – Our results point to the difficulties in the application of the “comply-or-explain” principle approach to corporate governance in emerging economies. First, applicable laws and regulations in these countries deter themselves the application of this principle, by the confusions and unclear provisions that they contain. Second, these countries are characterized by low enforcement mechanisms and less demanding users of information. These create an environment where local companies get away with unsanctioned non-compliance instances, and general type of explanations. However, our results suggest that larger, first-tier companies with larger boards have better corporate governance practices. Research limitations/implications – The small number of companies listed on the Bucharest Stock Exchange prevented advanced statistical treatment of data. Originality/value – We fill a gap in literature by providing, to our knowledge, the first study that addresses the case of corporate governance practices based on the “comply-or-explain” principle in Romania (one of the recent members of the European Union), and one of the few studies addressing the case of Central and Eastern European countries.

Journal

Corporate Governance – Emerald Publishing

Published: Feb 2, 2015

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