Corporate Governance or Corporate Governments? Voluntary Firm Practices on Paths to Regulation

Recent economic turmoil has ignited fresh debate on regulation of economic activity. Global markets are rife with asymmetries in both informal and formal rules, but previous research has not provided accounts of regulation that bridge these asymmetries. This dissertation redresses that deficiency by analyzing the conditions that explain a regulatory paradox: how voluntary firm practice contributes to formal regulation. Regulation is considered having legal, political, and economic characteristics, but it is also an inherently social process. The recommendation, adoption, and spread of both firm practices and regulations entail a reflexive and dynamic relationship between organizations and their environments. The locus of inquiry is corporate governance practices since the 1990s in ten countries with advanced capital markets. Regulatory change in these countries is indeed partially rooted in the prevalence of voluntary disclosures prior to regulation in over 1500 listed companies, in conjunction with additional key factors. These conditions include other firm behavior, namely corporate governance scandals and cross-listings in a network of global stock exchanges. Historical capital market development and the political makeup of legislatures in their home countries of incorporation are additional, country-level, conditions to regulation. Further, earlier regulation in some jurisdictions directly impacts the later regulation of the same governance practices in other jurisdictions. The paths to regulation, though causal, are not uniform across cases. Countries that are divergent in other accounts of national patterns of corporate governance actually converge along the paths to regulation I discuss. Divergence of countries persists, however, in governance arrangements that follow alternative paths to regulation or remain unregulated entirely. This analysis of comparative regulatory processes avoids both under-socialized accounts of individual firms and over-socialized accounts of countries. Its main contribution is an account of how business shapes regulation through both public and private ordering, implicating theories of regulation and comparative capitalism, as well as policy.