Why all models will not work out in Emerging nations?

 Why all models will not work out in Emerging nations?

 

The corporate governance infrastructure in countries like Bangladesh has elements of both shareholder and stakeholder perspectives, but none of them alone could solve the unique governance issues prevailing in developing countries. Reed (2002) observes that most emerging economies seem to have adopted the Anglo-Saxon model of corporate governance. As these models are not considered to be entirely suitable for the socio-economic characteristics of developing countries. Reed (2002) identifies several reasons for such preference. 

1.    although such a model is based on premises that are primarily held in developed economies will only work under assumptions of an efficient capital market, higher investor sophistication, and the presence of effective second-order institutions.

2.    the Anglo-American model is against the traditional cultures, values, and corporate and legal infrastructures of developing countries.

3.    These models are based on assumptions of efficient markets and equity financing.  

4.    many of these emerging economies are former British colonies, and enjoy historical ties to the Anglo-Saxon model. 

5.    low audit fees appear to be a major hindrance to quality audits.

6.    By adopting this model, governments in developing countries may try to send signals to the public that efficient corporate structures that will help generate conditions for economic growth and development.

7.    late adopters of corporate governance codes tend to mimic established practices for the sake of gaining legitimacy.

8.    international donor agencies such as the World Bank and the IMF have sometimes prescribed the adoption of such standards in member states as a condition for receiving loans. Like many other developing economies, Bangladesh is financially reliant on international donors or lending institutions such as the World Bank and the IMF, and instances of donor influence on government policymakers have been documented. As part of the financial sector reforms, Bangladesh adopted the international standards of accounting (ISA) and auditing (IAS) and was advised to embrace a western-styled model of corporate governance.