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A Taxonomy of Corporate Governance Reporting Concepts

Manuscript Type: EmpiricalResearch Question/Issue: This working paper explores the theory that due to globalization national corporate governance bundles including national and firm-level dimensions tend to converge to each other. The focus of the study is to provide empirical evidence for this hypothesis by deriving a taxonomy based on multinational corporate governance reporting concepts. This reveals that there are a few such concepts used by multinational corporations. In accordance with Healy and Palepu (2001, page 431) changes in corporate governance reporting disclosures are not regarded as “random events”, but are instead seen interrelated with changes in firm governance. Further, according to the author companies have to consider national as well as firm-specific corporate governance requirements due to the fierce competition in capital markets, so that changes in corporate governance disclosure changes also reflect national corporate governance dimensions. The sample is based on 30 foreign private issuers listed on the New York Stock Exchange (NYSE) comprising mainly financial institutions, industrial corporations and insurance entities. All these companies have in common that they file as non-domestic filers and therefore have to make a decision about which concept for corporate governance reporting they follow. Do they adopt the US - shareholder model, do they pursue a combination of their national model and the U.S. – shareholder model or do they follow a unified approach. This decision will be influenced by the firm’s internal governance structures, impact of shareholders, legal risk assessment and senior management decisions.Research Findings/Insights: This study underlies that although there are national boundaries and firm-specific differences in corporate governance there are common global corporate governance reporting concepts, which can be derived empirically. At the end, there is significant evidence to conclude that there are three main corporate governance reporting concepts: the single, the unified and the combined. However, due to the process of benchmarking and peers analysis corporations continually search to identify best-in-class concepts, which are most efficient and provide a competitive advantage. This market-driven impact can be traced back to studies by La Porta et al. (2000). Theoretical/Academic Implication: Findings could help to support the development of a global theory of corporate governance, as the study reveals common corporate governance concepts. Practitioner/Policy Implication: The study provides insights into corporate governance reporting of multi-national corporations and is relevant for practitioner as well as for the academic research about Corporate Governance.