ABSTRACT
The debate on corporate governance was particularly confined to developed countries, where external corporate governance mechanisms are normally functioning: capital markets are more advanced and firms usually have dispersed shareholdings. The recent succession of corporate scandals finally compelled less developed countries to acknowledge the impacting effect of corporate governance practices on economic development. Indeed, the evolution of the country's corporate structure and the forces driving corporate governance reforms over the past decade tend to point to some awareness within developing economies (Vaughn et al., 2006). It is feared that governance mechanisms recipes that have been suggested for advanced economies, including reactive and proactive law enforcement, may not help in the short- to medium-term horizons in less developed economies. It is suggested, at least in the short term, administrative governance may be a viable alternative to legal governance in LDE (less developed economies) stock markets (Pistor et al., 2005). The leading issue of corporate governance that arises in advanced economies concerns the legal and institutional framework likely to ensure good governance in organizations. The sought objective of corporate governance in developed economies is primarily to induce managers to act in the best interest of companies and their shareholders. Such considerations of corporate governance seem, however, not to reflect less developed economies’ specific needs where weak governance can have more ramifications, despite the fact that corporate governance is supposed to be important for the success of long-term development in all economies (Oman et al., 2003) and that “the critical role that corporate governance plays in financial development and enterprise reform has been confirmed by financial crises, corporate scandals, and the long and difficult transition from plan to market” (World Bank).
