International Corporate Governance and Finance: Legal, Cultural and Political Explanations

Abstract Corporate governance has drawn much attention with recent managerial misbehavior and corporate scandals. Various laws and reports around the world came up with propositions and regulation to restore confidence and reinforce investor protection. La Porta, Lopez, Shleifer and Vishny (LLSV 1998-2002) built up their theory on the protection of investors by the legal system. Roe’s political theory (2003) challenges the LLSV’s legal theory and provides another explanation for the differences between countries centered on the political variables. The cultural theory (Licht 2001) argues that cross country differences in corporate governance can be explained by differences between national cultures. The objective of this research is to examine the disparity and the determinants of the investor protection regulations around the world. More specifically, we try to explain this disparity by legal and cultural variables. We investigate empirically the disparity of the investor protection regulations measured by the index established by the World Bank across 81 emerging and developed countries in 2006. Our results confirm that combining classifications based on cultural dimensions, religion and on legal families can shed some light on the obscure part of the comparative analysis of corporate governance and investor protection. Arabic Abstract: