Corporate governance and capital flows

Abstract

Purpose

This paper aims to analyze existing corporate governance rules which aim to regulate and control the following type of problems: to restore confidence in the financial markets, to reformulate the existing corporate governance systems and mechanisms that have been inadequate, and, finally, to rethink the relationship between ethics and economy. It also aims to identify the factors determining the corporate governance systems and mechanisms in a global economy.

Design/methodology/approach

The paper reports the results of a comparative analysis between different corporate governance systems and mechanisms. In addition, in order to explore the role of institutional determinants in attracting foreign direct investment (FDI) flows, this study considers variables such as an index of shareholder protection, openness to FDI and the interaction between the two above mentioned variables.

Findings

This analysis confirms the economic theory that less open countries are characterized by stronger ownership restrictions and a weak corporate governance mechanism. Conversely, open market and investment regimes are particularly powerful instruments to attract investment in general and FDI in particular.

Originality/value

This study provides a survey of the main system and mechanisms of corporate governance all supported by a survey of recent developments regarding the empirical analysis on the role of institutional determinants in attracting FDI flows.

Citation

Talamo, G. (2011), "Corporate governance and capital flows", Corporate Governance, Vol. 11 No. 3, pp. 228-243. https://doi.org/10.1108/14720701111138661