Is there global convergence in corporate governance and why Essay

Is there global convergence in corporate governance and why - Essay Example This research paper is focused on convergence corporate governance practices among business firms and tries to determine the primary reason behind it. Paul (2005) mentioned in his study that firms belonging to different cultural background follow different organizational practices. The cross cultural difference in organizational behaviour has been studies by Hofstede, Wedel and Steenkamp (2002), where he stated that people belonging to different cultural background possesses different psychological profile, which is the key determinant behind variance in governance structures in the organizations. However, Chan and Cheung (2012) contrasted that despite of the presence of cultural differences among the firms, there exists a uniformity among the corporate laws, which compels all the business firms to work under the same roof. Porta et al (1999) further added that the firms that operate in a multinational level deals with the financial standards and regulations of different countries. Therefore, it becomes a big hassle for them if different countries follow different standards. This as a result forced the multinational firms to agree upon a commonly used regulations and standards that eased the business activities of the firms. Coffee-Jr (1999) mentioned that the importance of protecting shareholder’s interests is also a vital determinant of the growing convergence of the corporate governance structures. This is mostly because the outside investors often face the risk of uncertainty in some countries where the expropriation of the minority shareholders by the controlling shareholders is extensive. Paul (2005) opined that the advent of globalization has created an open global business market where all the firms from different avenues perform their respective business activities. Therefore it is imperative that the firms