chapter  1
19 Pages

Introduction

Globalisation has been instrumental in the internationalisation and integration of economic and commercial activities of nation states. Multilateral trade agreements have reduced trade barriers, and regional economic cooperation mechanisms such as the European Union have integrated product markets and capital market. As globalisation gains momentum, corporate governance systems of different nations are no longer confined by their local economies because economic globalisation enables companies to operate internationally. Increasing forces of economic globalisation and competition make it difficult for national governments to maintain policy or regulatory regimes of their own.1 Economic globalisation is perceived to impact on the competitive strength of nation states through trade and direct foreign investment across national borders, thereby leading to a convergence across nations in legal and other institutions.2 It was argued that competition among countries to attract direct foreign investment and to engage in international trade may lead to a ‘race to the bottom’ regulatory approach.3 However, while globalisation may pose significant competition and regulatory challenges for national economies and companies, policy responses of countries are likely to be conditioned by pre-existing political, economic and social systems.4 Therefore globalisation process may result in new divergences.5