The Role of Corporate Governance in fdi decisions: Evidence from Taiwan

Foreign Direct Investment

In view of the existing entrepreneurial potential, the level of foreign direct investment appears still to be relatively low in Turkey. Indications are that there exists a correlation between the low level of foreign investment and good public and corporate governance practices. Strategic investors seem not to be convinced that the economic environment is institutionalized in such a way that it will provide sustainable economic stability¹⁹.

Table 1.4: International Direct Investment (Inflows)

Foreign direct investment inflows the country on the conditions of best economic stability, sustainability, growth and development macro economic conditions. The number of established companies has been increased among years. As we are looking on Table 1.3, we can say that except the 2008 financial crisis start, number of companies financed by foreign investors has been increased constant. This shows that, Turkey institutionalization and corporation is improved.
Corporate governance is also important for merger and acquisitions. Participations of foreign investors in Turkey have also increased between the years 2004 to en of 2008.

Corporate Governance Benefits and Different Applications
Corporate governance adds most of the benefits to entities existence such as;

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  Investors are more confident
  
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  Protecting shareholders rights
  
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  Issued frequent and transparent financial reports
  
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  Independent board providing management oversight
  

Although there is a consensus that implementation of corporate governance principles is useful, no single corporate governance model is valid for every country However, the concepts of equality, transparency, accountability and responsibility appear to be main concepts in all widely acknowledged approaches to international corporate governance. One of the first attempts to develop a global set of principles was made by OECD. The OECD principles acknowledge that there can be no ‘one size fits all’ standard for every country. However, OECD recommends a set of guiding principles which provide the structure through which the objectives of the company and the means of attaining those objectives and monitoring performance are determined. Revised OECD principles encompass five main areas: the rights of shareholders, the equitable treatment of shareholders, the role of stakeholders in corporate governance, disclosure and transparency, and the responsibilities of the board²⁰.
In 2002, the USA passed the Sarbanes–Oxley Law which seeks to strengthen auditor independence and establish a new regulatory body for auditors of listed firms in the USA. Similarly, Germany adopted its corporate governance principles as law and the principles have become a legal obligation. Furthermore, Japan also re-examined and improved its company law. Russia, on the other hand, announced new corporate governance regulations. The European Commission (EC) made an action plan for the coming years within the framework of proposed directives. These directives aim to increase efficiency, enlarge the scope of public disclosure, remove obstacles to cross-border shareholder communication and participation, and enhance the responsibility of board members. The International Organization of Securities Commissions (IOSCO) emphasizes corporate governance as a prominent issue that should be addressed by national regulators. IOSCO attaches the utmost importance to efficient and timely enforcement of these codes, laws and regulations. In this regard, in October 2003, IOSCO Emerging Markets Committee convened a task force to examine measures to improve public and private sector enforcement of corporate governance principles and to recommend a framework to its members²¹