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

Key words:

Corporate Governance, Economic Instability, Foreign Direct Investment,

Contribution

Economic policies affect the business environment directly. Entrepreneur makes decision under the condition of economic environment. Internal and external market conjuncture and the behaviour of rational man/women trend occur with respect to the government policy. This study is important for the purpose of Economy and Business literature integration to evaluate corporate governance.

Introduction

The corporate governance landscape in Turkey is characterised by concentrated ownership, often in the form of family-controlled, financial industrial company groups. Free floats are often low, pyramidal structures are common and there is a high degree of cross-ownership within some company groups. Controlling shareholders often play a leading role in the daily management and strategic direction of publicly held companies. An organised equity market is a relatively recent phenomenon, with the Istanbul Stock Exchange (ISE) being established only in 1985. From the mid-1980s until 3-4 years ago, economic conditions were difficult for companies. Thin markets, relatively few active institutional investors and an unpredictable macro-economic environment limited incentives for companies to adopt good corporate governance practices. More recently, however, the return of foreign investors, greater opportunities for Turkish companies to do business abroad and increasing competition for foreign capital appear to be encouraging more companies to make good corporate governance practices a competitive advantage².

In addition to this, last 25 years information has been more than the before 5.000 years also it tends to increase continuously.³ Related to information provides more easy, complexity of transactions increase.
Another perspective stresses the corporate governance in Turkey in accordance to micro economic conditions rather than OECD macro economic conditions.
Together with the large-scale privatisation and deregulation that took place over the last two decades in these economies, the Asian crisis in mid 1997 added a new dimension to the importance of these issues. Academic research (Singh, 2003) and some influential economic analysis, including that of the IMF (1998) and leading US officials (Summers, 1998), suggest that the fundamental causes of the Asian crisis lay not so much in the macroeconomic imbalances, but rather in the normal microeconomic behaviour of microeconomic decision-makers in these economies. This type of (structuralist) analysis of the Asian crisis emphasises the lack of competition and the lack of sufficiently strong corporate governance structures as the major reasons of the crisis⁴.
The continuity and change in business elites seem to be closely related to the alterations in the politico-economic environment.

This study is important, because business and economy sciences are joined for corporate governance. That is corporate governance issue evaluates under the macro and micro economic variables of Turkey. Turkey local investors cannot be successful with respect to the foreign institutions. The source of fundamental reason of this issue is macro and micro economic policies. Political instability, capital inadequacy, economic insufficiency so forth prevents to companies development. Companies’ inefficiency and less management ability cause undeveloped companies. We can say that, economic conditions led to bad corporate governance.

History of Turkish Economy ensures macroeconomic structure which affects the micro variables also. Corporate governance is subject to micro economy for a firm and it is subject to macro economy for whole firms’ corporation and institutional level.