The Corporate Governance of Business Groups Around the World: A Review and Agenda for Future Research

Abstract

Scholarly interest in business groups (BGs) has grown considerably over the years, as they emerged as important players in the global economy. Yet, there exist ample differences in the corporate governance, strategies, and performance of BG‐affiliated firms. Given that BGs differ substantially across national institutional contexts, previous studies provide inconclusive arguments and empirical evidence regarding the complex relationship between corporate governance and firm performance within BGs.Our review of 301 articles published in highly ranked journals between 1986 and 2023 establishes a mechanism‐based framework to explain the effect of BG affiliation, ownership structure, and corporate governance practices on firm performance. We also reveal that many relationships between these factors vary cross‐nationally and over time, contingent on the national institutional strength where BGs are domiciled and operate.We develop a mechanism‐based framework to unpack the relationship between corporate governance and firm performance within BGs and discuss previous studies' findings across different institutional settings. We find that some mechanisms are generally applicable to BGs in many contexts, whereas others only hold in particular institutional conditions. We then offer several research avenues for further scholarly attention.Managers and policy makers should consider cross‐national differences to fully understand BGs. Ultimately, our review demonstrates that there is no one‐size‐fits‐all approach to BGs because their roles, functioning, and outcomes differ across institutional settings.