Cross-Border Business Strategies USA and Canada

Claessens & Yurtoglu, 2013). The efficacy of law enforcement is determined by the level of public governance, and corruption can increase when public governance is weak. The aforementioned factors have a substantial impact on corporate transparency and governance. It is worth emphasizing that a weak legal framework for business can frequently impede the development of the financial sector (Fan et al., 2011). Free capital is occasionally utilized to invest in new enterprises controlled by shareholders, resulting in wealth expropriation and a negative influence on the firm's financial health and performance (Ararat and Dallas, 2011). Corporate issues are highly influenced by the broader political and economic context, as well as institutional ownership arrangements (Claessens and Yurtoglu, 2013).

According to Shleifer and Vishny (1997) and La Porta et al. (1999), ownership concentration is significant in emerging markets. 

This is frequently coupled by poor shareholder rights, which can be attributable to insufficient regulations imposed by the applicable legislation. In countries where ownership is concentrated among a few significant shareholders, agency issues occur as a result of a misalignment of interests between managers and owners. As a result, these risks exist regardless of shareholder size. Agency issues can occur between owners and managers, even if they are considered to be the same. These challenges might arise when there is a mismatch between the interests and ambitions of the owners and managers. Conflicts may emerge as a result of potential conflicts of interest between managers and owners, as is common in family businesses. Thus, if we assume that ownership is concentrated, agency theory helps explain the tension that exists between managers and owners. Shleifer and Vishny (1986) claimed that concentrated ownership can help to solve agency concerns. They proposed that large and controlling shareholders, who have the motive and ability to monitor management, can benefit all shareholders by assuring efficient control. Alternatively, when significant controlling shareholders work with managers to abuse the company's resources for personal gain, it can increase agency issues and eventually undermine the firm's performance (Johnson et al., 2000).  As a result, they may struggle to find the best candidate or evaluate whether the hired person is efficiently carrying out their obligations (Eisenhardt, 1989). 

Moral hazard agency difficulties, as first proposed by Jensen and Meckling (1976), arise when managers fail to exert the essential managerial efforts in the principal's best interests. 

Given that the principal may be unaware of this, it is critical to supply them with the information needed to successfully monitor and measure effort levels, ensuring that awards are given appropriately. Several factors contribute to these issues, including managers' investment decisions, free cash flow, earnings retentions, and shirking that deviate from the positive net present value rule (Dhumale, 1998; Jensen, 1986, 1993; Jensen and Murphy, 1990; Shleifer and Vishny, 1986), as discussed in the literature. Furthermore, Claessens and Yurtoglu (2013) found that the ownership structure influences the relationship between the board and business performance. The competence of a board in representing shareholders and overseeing managers is critical for a firm in emerging markets, where corporate governance systems are frequently weak (Douma et al. 2006). In listed corporations in emerging nations, controlling families frequently hold important managerial positions, and succession planning is usually centered on promoting family members to these posts rather than outsider professionals (La Porta et al., 1998). The inclusion of family members on a firm board, particularly the founder, has been related to higher performance levels in some countries. Building solid ties, particularly among the economic elite, is critical in countries such as Thailand. However, there have been studies that demonstrate a positive impact on performance when outsiders are involved in different markets, such as the Korean Republic (Fan et al., 2011). Having a strong level of independence for the board is frequently advised in corporate governance codes, such as the UK Combined Code and the Cadbury Report. 

A board is often regarded to require a high level of independence from management. 

This can be accomplished by appointing a high number of non-executive directors and separating the positions of chairman and CEO. This improves monitoring and reduces agency issues, as proposed by Fama and Jensen (1983) and Shleifer and Vishny (1997). Ararat and Dallas (2011) have also claimed that when family members dominate boards, they may lose effectiveness due to a lack of constructive criticism directed at the dominant shareholders. Controlling stockholders may have their own goals they want to pursue. Furthermore, bad corporate governance and the interconnection of businesses, banks, and governments have been cited as important contributors to crony capitalism (Singh and Zammit, 2006). Nenova (2009) identifies the key challenges that emerging countries confront in terms of corporate governance. These include the shift of value from non-controlling shareholders or stakeholders to dominant major shareholders, inadequate disclosure methods, a lax regulatory environment, and audit concerns. Experts and scholars agree that the best successful strategy to administer a firm is determined by its specific conditions. This means that companies in the same industry may need distinct governance systems to survive (Ararat and Dallas, 2011). Several elements have been identified in emerging economies that have a substantial impact on business governance decision-making. These determinants include ownership structure, financial market development, and public governance quality (Fan et al., 2011; Ararat & Dallas, 2011;