Threat or Opportunity?
Studies in International Investment series
Edited by Karl P. Sauvant
Chapter 10: Corporate Governance of Emerging-Market TNCs: Why Does it Matter?
10. Corporate governance of emergingmarket TNCs: why does it matter? Rainer Geiger INTRODUCTION This chapter is about the link between corporate governance and investment policy. Attempted takeovers of domestic enterprises by foreign transnational corporations (TNCs) have raised concerns and fuelled debate by legislators and the general public. Corporate governance has ﬁgured prominently among the issues raised: What are the ownership and control structures of the bidder? Is there adequate disclosure of the TNCs’ decision-making process in the country of origin? If a foreign TNC is government-owned, is it used as a tool of government strategy? Do the TNCs involved have a track record of responsible business conduct? Are such concerns legitimate? To a large degree, the answer depends on the extent of diﬀerences between the TNCs of industrialized countries and those of emerging markets. Insofar as there are important diﬀerences, authorities need to consider the appropriate policy responses. There is not enough empirical evidence to demonstrate that corporate governance patterns in emerging markets are fundamentally diﬀerent from those in OECD economies. It appears, however, that ownership is often more concentrated in comparison with several of the developed economies, that state ownership is sometimes stronger and that transparency and corporate accountability are not always particularly well-developed. The key message of this chapter is that, even where the nationality of the bidding company is not deemed important by host country authorities, the bidder’s corporate governance does matter and is likely to have an impact on the outcome of investment...
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