Legal Plug-Ins: Cultural Distance, Cross-Listing, and Corporate Governance Reform
75 Pages Posted: 3 Apr 2003
There are 2 versions of this paper
Legal Plug-Ins: Cultural Distance, Cross-Listing, and Corporate Governance Reform
Legal Plug-Ins: Cultural Distance, Cross-Listing, and Corporate Governance Reform
Date Written: February 28, 2003
Abstract
This paper considers the extent to which countries or companies can successfully borrow foreign corporate governance elements with a view to improving their own governance system. Companies in particular theoretically can rent other countries' governance system through cross-listing. At bottom, the question is whether foreign legal elements can be "plugged-in" neatly into an existing corporate governance system, be compatible with it, and produce the expected improvements. Advances in different branches of psychology dealing with cultural orientations and cognitive styles suggest that the greater the cultural distance between the source and target countries the more difficult it would be to implement such a strategy for corporate governance reform.
While the arguments put forward in this paper are general, the present analysis focuses on South Korea as the central reference case. Only scant attention has been paid to the role Korea's culture may play in the implementation of legal reforms in the wake of the 1997 financial crisis or in recent initiatives to encourage cross-listing. This paper suggests that Korea's cultural endowment should not be perceived solely as an archaic legacy of generations past. Rather, this endowment should be treated as part of the country's social capital, with a view to putting this social capital to modern, productive use.
Keywords: corporate governance, legal transplantation, cross-listing, culture, cognitive style, South Korea
JEL Classification: G15, G18, G38, K22, Z13
Suggested Citation: Suggested Citation
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