Corporate governance codes in EU: a different approach from disclosure perspective.
The purpose of our empirical study is to divide corporate governance codes currently enforceable in European Union member states into disclosure groups by considering the level of transparency required in relation to OECD principles' recommendations. In addition, our paper is aimed to identify possible relationships between disclosure groups thus created and the level of transparency ensured by considering codes' issuer type and countries' legal regimes, as these have been defined in prior related literature.

The research methodology used, appropriate for such empirical studies, is based on correlations' analysis, making use of econometric tools using SPSS software. The results of the performed analysis show that the disclosure level of our groups is strongly correlated with findings related to codes' issuer type, while not all countries' legal regimes previously defined proved to reach to conclusions similar with ours.

Keywords: Corporate governance, Disclosure, Transparency, European Union

Article Type:
Hypothesis (Usage)
Corporate governance (Analysis)
Stefanescu, Cristina Alexandrina
Muresan, Mariana
Pub Date:
Name: International Journal of Business Research Publisher: International Academy of Business and Economics Audience: Academic Format: Magazine/Journal Subject: Business, international Copyright: COPYRIGHT 2012 International Academy of Business and Economics ISSN: 1555-1296
Date: March, 2012 Source Volume: 12 Source Issue: 2
Event Code: 200 Management dynamics Computer Subject: Company business management
Organization: European Union
Geographic Scope: Romania Geographic Code: 4EXRO Romania
Accession Number:
Full Text:

Corporate governance has become one of the most controversial topic of worldwide interest, since the latest economic scandals arose, thus leading to the financial crisis that spread all over the world. Consequently, it became one of the most attractive, dynamic and challenging research subject, too.

The lack of transparency and disclosure was often considered as one of the major cause of the latest corporate scandals and governance failures. Accordingly, many changes have occurred at regulatory level, in the last decades, leading to various types of surveys focused on it. Most of them analyzed corporate governance frameworks as a whole, being mainly focused on comparing these with the Anglo-Saxon system of corporate governance, often appreciated as a model in this respect. There have been also studies conducted considering as a term of comparison various provisions issued by well-known international legislators, like European Commissions. All of these had in fact the same purpose--to identify possible convergences of corporate governance systems across countries.


Our empirical study, that approaches corporate governance from regulatory perspective, too, by analyzing all codes currently enforceable at European Union level, has two main goals focused on transparency and disclosure provisions settled by these, thus being more comprehensive in these respect than prior related research focused on the same topic, ensuring as well originality to our paper. The first one is to define particular disclosure groups according to the level of transparency required and to classify all analyzed codes into these clusters. Our second objective is to identify possible correlations between the disclosure groups thus created and the level of transparency ensured by these, when considering either codes' issuer type or the legal regimes of the countries where these are in force, as these were defined in prior literature. The research methodology used for achieving our goals, mainly based on various mathematical and statistical tools (descriptive statistic and correlations) is presented in detail in the chapter dealing with the empirical design and results.


Corporate governance codes have been the subject of many studies, most of them looking for the best model toward all these might converge. A critical review focused on convergence of corporate governance (Yoshikawa and Rasheed, 2009) tried to offer some answers to the main dilemmas concerning this convergence, also highlighting future research directions. Thus, generally, these codes have been analyzed as a whole, by referring mostly to the Anglo-Saxon model of corporate governance, often used as a term of comparison (Coffee, 1999; Goergen and Renneboog, 2008) and sometimes even appreciated as "the winner" (Hansmann and Kraakman, 2004).

Prior theoretical studies that used regulatory frameworks for comparison reveal that "there does seem to be convergence on certain common core principles based usually around the OECD Principles of Corporate Governance" (Mallin, 2004), mainly due to the common elements introduced in major European regulations, as well as to the similarities in forthcoming legislation of the European directives (Wymeersch, 2002). On the other hand, the majority of the codes of the European Union countries are not in full accordance with the priorities of the European Commission (Hermes, et al., 2006). Besides these theoretical approaches, there have been some attempts in conducting empirical studies on this topic, in the latest years, providing comprehensive comparison analysis (Siems, 2009; Martynova and Renneboog, 2010), using various research methodologies, like "Leximetrics" (Lele and Siems, 2007; Siems, 2008) or "Latent Semantic Analysis" (Cicon, et al., 2010).

All these studies offer us outlooks for other empirical analysis on the same topic, as well as for comparative analysis between findings.


Basing on these background, we approached corporate governance from regulatory perspective, too, by using a different international guidance in this respect--the OECD principles of corporate governance, focusing on a particular topic--concerning transparency and disclosure requirements settled through issued codes. Consequently, we decided to classify corporate governance codes analyzed into different "disclosure groups", wondering as well if there is any link between these and those defined in prior literature considering other criteria.

4.1 Hypothesis development

Searching for an answer to our research question, we formally stated the following two hypothesis in order to individually test the correlations assumed:

H1: There is a relationship between disclosure groups created and issuer's type defined in prior literature.

H2: There is a relationship between disclosure groups and countries' legal regimes previously defined.

4.2 Sample selection and variables' description

For achieving our goal we selected a sample of countries, made of all 27 European Union member states, whose corporate governance codes currently in force are available on the website of the European Corporate Governance Institute--an international scientific non-profit association promoting best practices on corporate governance issues, which was the main source of information for our research.

For performing the comparative analysis with related research findings we considered one dependent variable revealing the level of disclosure and transparency in corporate governance codes compared with OECD requirements for each disclosure group developed, and two independent variables defined considering prior literature (Cicon et al., 2010; La Porta, et al., 1997).

The dependent variable (Avg.D&T S_Index) is the average value of disclosure indices for each disclosure group created, which are the result of our own development, the data needed and the methodology used being detailed in the next chapter. The disclosure indices considered for determining Avg.D&T S_Index are represented by the Jaccard's similarity coefficients established for each corporate governance code, revealing the degree of similitude between them and OECD principles as regards the compliance with disclosure and transparency requirements and recommendations (Stefanescu, 2011). The independent variables are:

--IT (Issuer Type), the following four identities being considered: "Composite", made of groups that contain representatives from at least two of the subsequent groups, "Government", referring to national legislatures or governmental commission/ministries, "Exchange", represented by national stock exchanges and "Industry", referring to industry or trade associations and groups, as in prior related literature (Cicon et al., 2010);

--LR (Legal Regime), in this respect being used classifications made by both La Porta, et al. (1997), who distinguished between "Common law", "German civil", "French civil", "Former socialist" and "Scandinavian civil" (values assigned to variable LR1) and Cicon et al. (2010), who introduced two new legal regimes ("Baltic civil" and "Global governance practices") instead of "Former socialist" and "Scandinavian civil" (values assigned to variable [LR.sub.2]).

Table I comprises the values assigned to all independent variables, considering the importance of each one in terms of disclosure, according to prior literature findings:

4.3 Disclosure groups development--data and methodology

For developing the disclosure groups, we considered the following intervals of values for D&T S_Index:

Consequently, we divided our sample of corporate governance codes according to their disclosure indices into six different groups revealing a level of disclosure from "very high level" to "insignificant level". The distribution of corporate governance codes into the disclosure groups thus created are presented in Table III, together with the average values of disclosure indices calculated for each group (Avg.D&T S_Index) and the average scores for the independent variables, revealing the level of disclosure depending on codes' issuers type (IT) and countries' legal regimes (LR1 and [LR.sub.1]).

4.4 Hypothesis test results

According to the purpose of our study--to identify possible relationships between our empirical results and prior findings as regards the level of transparency ensured by European Union corporate governance codes, we examined possible correlations between disclosure groups that we have just created and codes' issuers type and countries' legal regimes, previously defined in literature.

For performing the empirical analysis, we calculated Pearson coefficient that is usually used for measuring the strength of linear dependence between two variables, giving a value between "1", that describes the perfect direct relationship and "-1", that reveals an indirect one, "0" value meaning that there is no linear correlation between variables.

The correlations between the dependent variables (Avg.D&T S_Index) and both independent variables (LR and IT) are presented in table IV.

By analyzing the values of Pearson's coefficients, we reached to the conclusion that there is a positive relationship of high intensity (0.923) and a probability of significance of 99% (Sig. < 0,01) between the disclosure index of each group created and the average of scores assigned to these groups considering the four types of codes' issuer defined in prior literature. Consequently, our first hypotheses ([H.sub.1]) will be accepted, allowing us to assert that there is a relationship between disclosure groups created and the level of transparency ensured to corporate governance codes by considering their issuer's type defined in prior literature.

For testing our second hypotheses, we considered two classifications of countries legal regimes from prior related research. Accordingly, we identified a strong relationship (0.914) between the same disclosure groups' indices and the average values of scores assigned considering the first countries legal regimes defined in the year 1997, this being significant with the probability of just 95% (Sig. < 0,05). On the other hand, the importance given to disclosure and transparency by the newest countries' legal regimes from prior literature proved to be insignificant for establishing a relationship with the disclosure groups created, as the value of Pearson coefficient (0.747) and its level of significance (0.88) reveal.

From the above statistical analysis we can reach to the conclusion that the disclosure level of each group created is correlated just with the average scores calculated considering the legal regimes of countries defined by La Porta, et al. (1997). Consequently, our second hypotheses ([H.sub.2]) will be just partially accepted, allowing us to assert that there is a relationship between disclosure groups created and the level of transparency determined considering countries' legal regimes defined in prior literature.


The empirical analysis performed provides not only a comprehensive image of the importance given to disclosure and transparency by corporate governance codes from all European Union member states through the disclosure groups created, but also relevant comparisons with prior research findings focused on the same goal.

Thus, our paper concluded that the level of disclosure ensured by our groups of corporate governance codes is correlated with the types of issuer already defined in literature (Cicon et al, 2010). Accordingly, the highest level of disclosure is required by those codes settled in collaboration of several institutions, coming from various economic fields, while the lowest level comes from those issued by industry or trade associations that are more likely to defend their own interests through as little information disclosure as possible, rather that ensuring a transparent image.

As regards countries' legal regimes, we reached to contradictory results when considering both classifications from prior literature. Thus, our results are in accordance just with those of La Porta, et al. (1997), the highest level of disclosure being ensured by codes issued under Common Law regime. This conclusion, highlights that Anglo-Saxon model of corporate governance proved to be over the others in this particular approach concerning transparency and disclosure requirements, too, as many researchers have already concluded in general. Our findings also reveal that there are other codes, from French and German civil regimes or even from the Former socialist one, that gave at least as much or even higher importance to disclosure issues.

In conclusion, our empirical study provides relevant results, comparable and consistent with prior literature findings, through a different methodology, leading to disclosure groups of corporate governance codes, which all are adding value to our research.


This work was supported from the European Social Fund through Sectoral Operational Programme Human Resources Development 2007-2013, project number POSDRU/1.5/S/59184 Performance and excellence in postdoctoral research in Romanian economics science domain", Babes-Bolyai University Cluj-Napoca being partner within the project.


(1.) Cicon, J.E. et. al. (2010), "European Corporate Governance: A Thematic Analysis of National Codes of Governance", European Financial Management, doi: 10.1111/j.1468-036X.2010.00542.x.

(2.) Coffee, J. (1999), "The future as history: The Prospects for Global Convergence in Corporate Governance and its Implications", Northwestern University Law Review, vol. 93, pp. 641-707

(3.) Goergen, M. and Renneboog, L. (2008), "Contractual Corporate Governance", Journal of corporate finance, vol. 14(3), pp. 166-182

(4.) Hansmann, H. and Kraakman, R. (2004), "The End of History for Corporate Law, Convergence and persistence in corporate governance", Cambridge University Press, pp. 33-68

(5.) Hermes, N. et. al. (2006), "Corporate Governance Codes in the European Union: Are They Driven by External or Domestic Forces?", International Journal of Managerial Finance, vol. 2(4), pp. 280-301

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(7.) Lele, P. and Siems, M.M (2007), "Shareholder Protection: A Leximetric Approach", Journal of Corporate Law Studies, vol. 17, pp. 17-50

(8.) Mallin, C. A. (2004), Corporate Governance, Oxford: Oxford University Press, pp. 207

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(11.) Siems, M.M (2008), "Shareholder Protection Around the World (Leximetric II)", Delaware Journal of Corporate Law, vol. 33, pp. 111-147

(12.) Stefanescu, C. (2011), Disclosure and transparency in E.U. corporate governance codes vs. OECD principles--empirical comparative approach, Working paper, submitted for review.

(13.) Wymeersch, E. (2002), Convergence or divergence in corporate governance patterns in Western Europe? in J. A. McCahery et al. (2002), Corporate Governance Regimes: Convergence and Diversity, Oxford: Oxford University Press, pp. 230-250

(14.) Yoshikawa, T. and Rasheed, A. (2009), "Convergence of Corporate Governance: Critical Review and Future Directions", Corporate Governance: An International Review, vol. 17, pp. 388-404

Cristina Alexandrina Stefanescu, Babes-Bolyai University, Cluj-Napoca, Romania

Mariana Muresan, Babes-Bolyai University, Cluj-Napoca, Romania


Dr. Mariana Muresan, Ph.D.,is professor at Babes-Bolyay University, Faculty of Economics and Business Administration, Cluj-Napoca, Romania.

Dr. Cristina Alexandrina Stefanescu, Ph.D., is lecturer at Babes-Bolyay University, Faculty of Economics and Business Administration, Cluj-Napoca, Romania. Until recently, she worked as a banking supervisor at the National Bank of Romania. She has published her research in journals such as the Journal of International Finance and Economics, International Journal of Business Research, Journal of International Management Studies and Journal of International Business and Economics.

      [LR.sub.1]          Score         [LR.sub.2]          Score

Common Law (CL)             5     Common Law (CL)             5
French civil (F)            4     German civil (G)            4
Former Socialist (FS)       3     Baltic civil (B)            3
German civil (G)            2     French civil (F)            2
Scandinavian civil (S)      1     Global Practices (GP)       1

          IT              Score

Composite (C)               4
Exchange(E)                 3
Government (G)              2
Industry (I)                1


D&T S_Index         >0.6   (0.5-0.6]   (0.4-0.5]

Disclosure group    VHL       HL          ML

D&T S_Index         (0.3-0.4]   (0.2-0.3]   <0.2

Disclosure group       LL          VLL       IL


Disclosure Groups      Countries               D&T        Avg.D&T
                                             S_Index      S_Index

VHL    very high       AUS, HUN, LUX          0.605        0.605

HL     high level      UK, SVK, BEL           0.579        0.579

ML     medium level    LTV, SLO, GRE, FIN     0.447        0.434
                       POL, CZH               0.421

LL     low level       LIT, SPN, NTH          0.395        0.368
                       PTG                    0.368
                       DEN                    0.342

VLL    very low        SWD                    0.289        0.246
       level           BLG, ROM               0.237
                       GER, EST, ITL          0.211

IL     insignificant   FRA, CYP               0.184        0.123
       level           IRL                    0.105
                       MLT                    0.079

Disclosure Groups      Countries            [LR.sub.1]   [LR.sub.1]

VHL    very high       AUS, HUN, LUX          3.000        2.300

HL     high level      UK, SVK, BEL           4.000        2.600

ML     medium level    LTV, SLO, GRE, FIN     2.833        1.333
                       POL, CZH

LL     low level       LIT, SPN, NTH          2.400        0.600

VLL    very low        SWD                    2.166        1.833
       level           BLG, ROM
                       GER, EST, ITL

IL     insignificant   FRA, CYP               0.800        0.500
       level           IRL

Disclosure Groups      Countries                IT

VHL    very high       AUS, HUN, LUX          2.666

HL     high level      UK, SVK, BEL           3.000

ML     medium level    LTV, SLO, GRE, FIN     2.166
                       POL, CZH

LL     low level       LIT, SPN, NTH          1.200

VLL    very low        SWD                    1.666
       level           BLG, ROM
                       GER, EST, ITL

IL     insignificant   FRA, CYP               0.250
       level           IRL


                        Avg.D&T   [LR.sub.1]   [LR.sub.2]   IT

Avg.D&T   Pearson             1      .914 *          .747   .923 **
S_Index   Correlation

          Sig.                          .011         .088      .009

          N                   6            6            6         6

*. Correlation is significant at the 0.05 level (2-tailed).

**. Correlation is significant at the 0.01 level (2-tailed).

Source: calculations made by authors using SPSS software
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