PI: David C. Stark Co-PI: Dennis Bogusz Columbia University
Why do regulators mandate practices that firms already employ voluntarily? In the research, a dataset will be created of regulations, stock market listing rules and corporate governance standards from the United States and nine other countries. Voluntary practices will be ascertained from annual reports and other corporate disclosures from roughly 1500 listed companies headquartered in the focal countries. Data for both regulations and voluntary practices span the period from 1989 to 2008. Qualitative comparative analysis will explain the various paths to regulation, both within and between the countries, through combinations of causal conditions. Foremost is the prevalence of originally voluntary practices. Additional conditions that explain the transition to regulation include a history of corporate governance scandals, capital market development, and the political and legal framework of each country.
BROADER IMPACTS: The resulting dataset will become a valuable research tool for other scholars keen on understanding regulatory change partially rooted in firm behavior. Further, this research stands to benefit industry leaders, regulators and policymakers by elucidating relationships in the capital markets that, although often overlooked, are key to regulatory reform.
Findings from this project indicate prominent corporate influence of regulation whereby governments appear more "corporate" in that they merely duplicate regulation of extant business practice. Precise configurations of conditions that lead to this outcome vary across corporate governance practices, but different countries can follow similar paths to this type of regulation. Governments are perhaps not the harbingers of regulation that legal systems have historically served. Rather corporate governance no longer refers simply to governance of firms, but also governance by firms. I show that voluntary firm practice is on the one hand a response to uncertainty: adopting certain governance practices either deliberately pre-empts regulation or anticipates regulation of the same practice. On the other hand, and failing regulatory pre-emption, firms can provide regulators the template for future regulation. I also show that regulators likewise utilize uncertainty strategically when regulating before or after other regulators. Lastly, I have given particular attention to an evolving form of legal regulation theory that accounts for extra-juridical sources of law. Regulation is ultimately a social process. The choices of public and private actors in the economy to control others—to govern—have political, legal and of course, economic characteristics. Yet we cannot owe an account of their behavior to institutions or structures alone. We must instead unpack the process of regulation at different levels and by different actors. This study attempted to explain such regulatory process and opens the door to future research on comparative regulation of previously voluntary behavior.
