Klaus Gugler and B. Burcin Yurtoglu 1 INTRODUCTION Over the last two decades, corporate governance (CG) has become an important issue both in the academic literature and in public policy debates. This sudden attention is interesting, because some basic issues related to CG have been raised at least since Berle and Means (1932). Over these last two decades, many issues such as mergers and takeovers, ﬁnancial structure of the ﬁrm, organizational structures, the relationship between performance and ownership have been analysed within the framework of CG. Having said that, it is all the more interesting to note that there is no single deﬁnition of CG and the CG problem. Starting with the inﬂuential book by Berle and Means (1932), the attention of academia has focused on a narrow view of CG. According to this view, CG problems in the modern corporation arise when professional managers are not accountable to dispersed shareholders. This view, which corresponds to the principal–agent framework, culminated in the following deﬁnition of CG: ‘Corporate governance deals with the ways in which suppliers of ﬁnance to corporations assure themselves of getting a return on their investment’ (Shleifer and Vishny, 1997). Consequently, much of the research on CG took an investor perspective and looked at the ways in which corporate insiders can attract external ﬁnancing from outside investors. This narrow view has been criticized and challenged by others who argue that other stakeholders, such as employees, customers, suppliers and communities, have a vested interest in...
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