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The role of informal institutions in corporate governance: Brazil, Russia, India, and China compared

Estrin, Saul and Prevezer, Martha (2011) The role of informal institutions in corporate governance: Brazil, Russia, India, and China compared. Asia Pacific Journal of Management, 28 (1). pp. 41-67. ISSN 0217-4561

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Abstract

This paper argues that the role of informal institutions as well as formal ones is central to understanding the functioning of corporate governance. We focus on the four largest emerging economies: Brazil, Russia, India, and China-commonly referred to as the BRIC countries. Our analysis is based on the Helmke and Levitsky framework of informal institutions and focuses on two related aspects of corporate governance: firm ownership structures and property rights; and the relationship between firms and external investors. We argue that for China and some states of India, "substitutive" informal institutions, whereby informal institutions substitute for and replace ineffective formal institutions, are critical in creating corporate governance leading to enhanced domestic and foreign investment. In contrast, Russia is characterized by "competing" informal institutions whereby various informal mechanisms of corporate governance associated with corruption and clientelism undermine the functioning of reasonably well set-out formal institutions relating to shareholder rights and relations with investors. Finally Brazil is characterized by "accommodating" informal institutions which get around the effectively enforced but restrictive formal institutions and reconcile varying objectives that are held between actors in formal and informal institutions. © 2010 Springer Science+Business Media, LLC.

Item Type: Article
Official URL: http://www.springerlink.com/content/106589/
Additional Information: © 2010 Springer Science+Business Media, LLC.
Library of Congress subject classification: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Sets: Departments > Management
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 30 Mar 2011 10:33
URL: http://eprints.lse.ac.uk/33552/

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