The Mother of All Path Dependencies: Toward a Cross-Cultural Theory of Corporate Governance Systems

The goal of this article is threefold. First, it points out the growing awareness among practitioners and theorists of the relevancy of national culture to corporate governance and securities regulation. It shows that efforts to treat cross-cultural aspects so far have been few and sporadic and thus posits the urgent need for a systematic cross-cultural theory of corporate governance systems. Second, this article introduces the framework of cultural value dimensions (CVD) of cross-cultural psychology and demonstrates its potential usefulness for analyzing problems of the sort discussed here. It highlights the promise held by the CVD framework for producing testable hypotheses with regard to cultural features of corporate governance systems, in a fashion similar to standard analyses of corporate finance. Third, this article sketches out an outline for a cross-cultural theory of corporate governance systems based on the CVD framework by implementing it to fundamental issues like shareholding structures and the regulation of self-dealing, insider trading, and disclosure. It concludes that national cultures can be seen, metaphorically, as the mother of path dependence dynamics in the sense that they play a role in both the origin and in future development of corporate governance systems. The mode of analysis proposed in this article could be extended to other legal fields and also looks very promising for the study of law and social norms.