Corporate Governance and Complexity Theory

Corporate Governance and Complexity Theory

Marc Goergen, Christine A. Mallin, Eve Mitleton-Kelly, Ahmed Al-Hawamdeh and Iris Hse-Yu Chiu

This multidisciplinary book takes an innovative approach to corporate governance by linking governance and complexity theory. It provides important new insights into why governance systems are failing and what may be done to improve this situation.

Chapter 1: Introduction

Marc Goergen, Christine A. Mallin, Eve Mitleton-Kelly, Ahmed Al-Hawamdeh and Iris Hse-Yu Chiu

Subjects: business and management, corporate governance, economics and finance, behavioural and experimental economics, corporate governance, law - academic, corporate law and governance

Extract

The aim of this book is threefold. The first aim is to provide a review of the legal aspects of corporate governance with particular emphasis on the objective of the corporation. The literature review starts with a discussion of the division of powers in the corporation and the role of owners and management in corporate governance. It then proceeds by analysing the role of stakeholders as well as that of gatekeepers as actors in corporate governance. The second aim is to investigate whether corporate governance affects performance. Some of the current major challenges that researchers are facing are uncovered. One of these major challenges includes the potential endogeneity of corporate governance characteristics. Ownership is one of the corporate governance characteristics that may be endogenous. While early studies on the link between ownership and firm value have assumed that ownership is a given, i.e. is randomly determined, more recent studies have revealed evidence suggesting that the current ownership structure of a corporation depends – at least to some extent – on its past financial performance. Hence, financial performance may not only be the result of the firm’s ownership (as well as other corporate governance characteristics), but it may also shape the latter. The third aim is to introduce complexity theory and to explain how its concepts may be used to fill in the gaps in the existing corporate governance literature. In particular, complexity theory may provide a way forward to deal with the frequently complex relationships between the corporation on the one hand,...