Corporate Governance and Regulation

This has been achieved through analysis of literature on the same. The findings show that corporate governance in the emerging markets is crucial in improving growth rates with its main challenges being poor harmony and the amelioration of transparency levels. Introduction In the year 2001, Jim O'Neill, an economist and the chairman of the investment banking company known as Goldman Sachs created the neologism BRIC. This represents four countries, namely, Brazil, Russia, India and China. These countries we're considered to showcase rapid development and the potential to make great economic leaps. Economies with large populations typically have a great number of consumers to which firms can market their products and services while high population growth rates translate to a rapid market expansion and subsequently increasing the customer base.

In this paper, the corporate governance in five of the N11 countries, namely, Egypt, Indonesia, Mexico, Philippines and Turkey, will be explored. The aforementioned countries have been chosen as they are newly industrialized economies and therefore have a larger industrial capacity than the remaining countries. They are also making more exports that include heavy materials and products while the remaining greatly depend on primary exports among other reasons as indicated in the appendix. Corporate Governance and Emerging Markets What choice do investors have when the peer reviewed research available does not offer decisive evidence on the features of governance that are of utmost importance in emerging markets and how these features influence the performance of companies? On a daily basis, investors are faced with the task of making pragmatic decisions in relation to emerging economies while they can only access incomplete and contradictory information.

Research has also been carried out to explain how the structures of different companies influence corporate governance and the subsequent effect of the choices of governance employed in a company on its achievements or performance. Most of the research that has been conducted has been derived from information from developed countries and also provide an evaluation of governance styles that could be associated with better firm performance. Role of Corporate Governance in the N11 Markets Although there is some ambiguity brought about by the phrase, corporate governance, there is concurrence among researchers on the evaluation criteria and determinants associated with the abstraction. There are external and internal determinants involved whereby the external determinants involve the investment atmosphere in a country while the internal determinants are the set of rules that determine the procedure of making decisions and the distribution of responsibilities among members of a firm.

External determinants include regulations that control performance in the market such as bankruptcy laws, the level of effectiveness of financial institutions of the nation to fund projects as well as bodies that carry out supervision. The theory focuses on more than just the traditional members of the company and moves on to the stakeholders. The stakeholders influence the corporation but not directly. They get involved with the corporation with the hope that they will gain benefit in some form. Corporate governance allows the set-up of rules that engage stakeholders in the governance of the firm and as such keep them informed on the engagements of the firm. Corporate governance is crucial as, in its proper application, it aids in the achievement of increased growth rates.

Egypt first gave attention to the concept of corporate governance in the year 2001 under the ministry concerned with trade. The ministry opined that amendments in the economic sector that had been initiated in the 1990s could only be brought to completion if there was a formulation of a framework that would control performance in the private sector (Porter & Kramer, 2017, p. In Egypt, the board of directors must always have a non-even number of members with the least number of members accepted being three. The structure of the board is not controlled by any rules and the chairman of the board is often also regarded as the managing director of the firm. The board members in Egyptian firms ought to also be shareholders with only two members taking exception to that rule as they are usually chosen as experts.

It has resulted in a majority of firms in Mexico getting defensive as they view it as a means to control the shareholders of Mexican companies grounded on rules that are Anglo-American in nature. Although Mexico has made a lot of improvements in corporate governance, Mexico needs an evaluation of the practices it employs in business so that they can be consistent with those employed in the rest of the world. In Mexico, the notion of introducing corporate governance with the aim of bringing in investments and benefit of everyone involved in the corporate world has only now become a topic of interest. In the Philippines, corruption has been a major problem. Corporate governance adoption is regarded a responsibility of the Securities and Exchange Commission (SEC).

Instead, it follows a two-tier system where power is divided among the management. The supervisory boards determine who the members of the board of directors are and te board members are required to provide reports to the board of supervision on a regular basis. The firms in Turkey focus more on maximizing their value on a short term. There are two major perspectives that are held by people today with regards to the corporate governance system. While some believe that the governance of a company is completely the role of the shareholders, there are those who deal with outsiders when it comes to firm governance. Another study that reviewed the practices related to corporate governance in Asia still had Indonesia and Philippines ranking in the bottom and the lack of transparency was one of the major causes of this poor performance (Huang & Zhu, 2015, p.

Another challenge in corporate governance is poor harmony and weak codes and regulations. This results in a lack of incorporation of international standards and disharmony with other Asian markets. For instance, in Indonesia, state ownership is widespread and this could impede the competitiveness among the economies. Approximately a third of the gross domestic product of Indonesia is from organizations that are possessed by the state and so are an estimate of 400 listed companies (Augouleas & Cullen et al, 2014, p. Shareholders also do not play any part when it comes to important transactions. Dominance in the corporations is mainly by business groups. This constitute the holding firms that consist of financial and other institutions that are recognized by the Turkish Law. The business groups are usually controlled by certain families while te shareholders have little say in matters.