Institutional Factors and Corporate Governance

The purpose of this paper is to explain the role of institutions in different corporate governance arrangements. It applies the logic of trade-off amongst the marginal costs of participants in business organizations as a framework for analyzing corporate governance arrangements in different institutions. The paper provides an empirical evidence of the trade-off of costs between the shareholders and employment and explains how corporate governance functions in setting the trade-off in different institutional contexts. The trade-off approach to corporate governance contributes an alternative approach for comparative economics in explaining the variations of corporate governance amongst countries or political regimes