Guillén & Capron (2015). State Capacity, Minority Shareholder Protections, and Stock Market Development

Mauro F. Guillén – The Wharton School of the University of Pennsylvania
Laurence Capron – INSEAD

Shipeng Yan – IESE Business School
Ali Samei – IESE Business School

Article link:

Question 1. An important insight arising from this study is a strong focus on state capacity, a widely used concept in political sciences, but not so much so in institutional theory. What is the background story that inspires the interdisciplinary use of “state capacity”? In addition, the underlying logic of how state capacity affects adoption seems applicable to a variety of organizations. Can you also speak more about the generalizability of your findings?

The motivation for our paper comes from institutional theory itself. The paper seeks to test the difference between two types of decoupling, i.e. means-ends decoupling and policy-practice decoupling. We formulate perhaps the first integrated test of these two concepts, finding evidence for the latter though not for the former. In order to test the latter effect, we borrow the concept of state capacity, given that our dependent variable is the adoption by different countries of legal protections for minority shareholders and the impact that such an adoption may have on stock market development. Thus, we use the concept of state capacity to enrich institutional theory.

Question 2. Your study has assembled an impressive array of novel data, such as the measure on normative influence by economics articles and the minority shareholder protection index. We understand that gathering reliable cross-national data is laborious and time-consuming, and therefore we really applaud the fact that you have made the minority shareholder index publicly available. Can you tell us more about the background story of your data collection? Why did you decide to make such a huge commitment to build the minority shareholder protection index? Why did you decide to make it publicly available? Do you have any advice (or a cautionary note) for future researchers who want to take on a similar challenge?

We have a long-term interest in corporate governance and its effects on a number of organizational and strategic outcomes. Thus, collecting the data on legal provisions protecting minority shareholders was part of a larger program of research. We spent nearly three years collecting the data. We hired dozens of research assistants who were lawyers knowledgeable about the laws of different countries around the world. It is very important to launch a large-scale data collection process with a clear theoretical foundation as to what one intends to do with the data and with clearly defined and consistent criteria. It is also very important to explore ensure inter-coder reliability.

Question 3. How does this paper fit into your larger research agenda? To which direction will your future projects evolve? While we want to thank you for the suggestion on institutional convergence and financial crisis, we also want to know more about future directions. If you were to advise a PhD student who wanted to do a follow-up study, what suggestions would you give?

In this paper we use legal minority shareholder protections s the dependent variable, and also as an independent variable when explaining stock market development. Future research will incorporate this independent variable in studies of corporate acquisitions and other types of corporate governance issues.

Question 4. Can you talk about the review process that has led you to the final version? Are there any insights or analyses you would like to share which didn’t end up in the final paper?

The paper went through three major revisions. We took the reviewers’ comments very seriously. In fact, the paper changed significantly, especially after the first iteration. The paper was not initially focused on the role of state capacity, but the reviewers invited us to pursue the issue of decoupling more thoroughly, and in so doing we found that we needed to borrow that concept from the political science literature. We are very grateful that the reviewers helped us turn our original manuscript into a cohesive article.

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