Law, finance, and the international mobility of corporate governance

We introduce the topic of this Special Issue on the “Role of Financial and Legal Institutions in International Governance”, with a particular emphasis on a notion of “international mobility of corporate governance”. Our discussion places the Special Issue at the intersection of law, finance, and international business, with a focus on the contexts of foreign investors and directors. Country-level legal and regulatory institutions facilitate foreign ownership, foreign directors, raising external financial capital, and international M&A activity. The interplay between the impact of foreign ownership and foreign directors on firm governance and performance depends on international differences in formal/regulatory institutions. In addition to legal conditions, informal institutions such as political connections also shape the economic value of foreign ownership and foreign directors. We highlight key papers in the literature, provide an overview of the new papers in this Special Issue, and offer suggestions for future research.


INTRODUCTION
International Business (IB), economics and finance scholars have developed a significant body of research focused on the international mobility of capital, labor and goods. Two main theoretical approaches to international business strategy -internalization theory and the resource-based view (RBV) -assume that the most efficient firm strategy will be that which maximizes rents from the firm-specific assets and thus maximizes the long-run value of the firm. The role of management in such theories is essentially to identify and implement this efficient strategy. Organizational control processes are equally important in terms of creating value in the context of globalization. These processes facilitate accountability, monitoring and trust within and outside of the firm, and should ultimately lead to improvements in the firm's performance and long-term survival.
Although prior IB and international finance studies have identified a number of governance factors that may affect global strategy both at the headquarter and subsidiary levels of a multinational company (MNC), this research generally considers corporate governance functions and processes as being location-specific (Filatotchev & Wright, 2011). The underlying assumption in the vast majority of governance papers in the context of globalization is that governance is immobile, and various governance mechanism are location-bound unlike international flows of factors of production, goods and services that form a core research area of IB. The focus in traditional international business has been on labor, capital, and goods, as well as the control processes around these inputs. Common control and governance processes facilitate trust within and outside of a firm. In a repeated game, trust plays a role that limits defections. Ownership or foreign direct investment (FDI) in an international business context is the key to creating a repeated game. Therefore FDI may facilitate the creation of trust through the overseas extension of governance practices.
Corporate governance research from an IB perspective has traditionally not considered the mobility of corporate governance. However, there is a growing body of theoretical and empirical evidence pointing out that corporate governance structures and processes are becoming increasingly mobile internationally. Mobility of corporate governance in this context refers to scenarios where firms export or import governance practices in the process of internationalization. For example, a firm may export its governance practices to its acquisition target in an overseas location. Likewise, a local firm may import overseas governance practices by appointing foreign directors on its board or attracting foreign investors through a cross-listing on a foreign exchange. In this introduction, we focus on four related channels through which corporate governance may be internationally mobile and highlight the contributions of the papers in this Special Issue: (1) international mergers and acquisitions (Ellis, Moeller, Schlingemann, & Stulz, 2017;Renneboog, Szilagyi, & Vansteenkiste, 2017), (2) foreign ownership (Aguilera, Desender, Ló pez-Puertas, & Lee, 2017;Calluzzo, Dong, & Godsell, 2017), (3) foreign political connections (Sojli & Tham, 2017), and (4) foreign directors (Miletkov, Poulsen, & Wintoki, 2017). Overall, the recognition of corporate governance mobility presents an important opportunity for further theory building in the contest of both IB and finance research, and this is a focal point of this Special Issue.
Further, we build on an established tradition in the IB and finance areas focused on the role of formal and informal institutions and show that the mobility of corporate governance is strongly associated with diverse institutional contexts within firms operate domestically and globally. As Bell, Filatotchev, & Aguilera (2014) argue, firms are embedded in different national institutional systems, and they experience divergent degrees of internal and external pressures to implement a range of governance mechanisms that are deemed efficient in a specific national context. Therefore we suggest that formal institutional factors such as legal or regulatory, as well as informal (cognitive and cultural) institutions may shape the process of governance mobility. Likewise important is that cross-national institutional differences may pose a barrier for an international transfer of governance practices.
The ideas of mobile governance in different institutional contexts form a theoretical foundation for the papers included in this Special Issue. The call for papers for this Special Issue drew 84 submissions written by authors stemming from 24 nations. Thirteen papers were accepted for a paper development workshop in London in February 2016, and six of those papers appear in this Special Issue (an additional three appear in regular JIBS issues). Taken together, these papers provide a novel contribution to IB research by focusing on international dimensions of corporate governance mobility and the implications of macro-level, institutional factors on the governance processes and outcomes across national borders.
This introduction to the Special Issue is organized as follows. The next section discusses institutional aspects of corporate governance. The section thereafter discusses the mobility of corporate governance. We then introduce the specific topics pertaining to mobility in the case of international mergers and acquisitions, foreign owners, and foreign directors. We provide evidence of the growing importance of these topics in relation to more traditional topics in international business. The last section offers concluding remarks and suggestions for further research.

INSTITUTIONAL ASPECTS OF GOVERNANCE
In their seminal review of corporate governance research, Shleifer & Vishny (1997 p. 773) provide the following definition of corporate governance: ''Corporate governance deals with the agency problem: the separation of management and finance. The fundamental question of corporate governance is how to assure financiers that they get a return on their financial investment.'' As corporate governance research has evolved, studies have broadened the definition of ''good governance'' by considering it as a process-driven function that facilitates value creation. These processes develop over time across countries and within firms. The financial impact of good governance on the firm is unambiguously positive, both in terms of shortterm efficiency outcomes and longer-term sustainability of the business. Perhaps most intuitive is that good governance, which minimizes the chance of managerial tunneling -defined by Johnson, La Porta, Lopez-de-Silanes, & Shleifer (2000) as the expropriation of corporate assets or profitsleads to an enhanced capability of the firm to raise external capital (Aggarwal, Klapper, & Wysocki, 2005). Gompers, Ishii, & Metrick (2003) and Bebchuk, Cohen, & Ferrell (2009) provide important metrics for the robustness of governance at the firm level and find that good governance firms have higher firm value, profits, and sales growth. The finance literature also suggests that good governance leads to an increase in Tobin's Q (Daines, 2001) and higher firm value in M&A (Cremers & Nair, 2005), among other factors. The drivers of ''good governance'' and its financial benefits can come from monitoring by the Board of Directors (see, e.g., Huson, Parrino, & Starks, 2001), institutional investors (see, e.g., Li, Moshirian, Pham, & Zein, 2006), creditors (Nini, Smith, & Sufi, 2012), whistle blowers (Dyck, Morse, & Zingales, 2010) and the market for corporate control (Masulis, Wang, & Xie, 2012).
Management and IB perspectives have further broadened research on ''good corporate governance'' by considering different organizational and institutional contexts as well as their effects on the firm's internationalization. Some studies, for example, indicate that monitoring, though important, is not the only function of corporate governance. Indeed, good governance can also be viewed as having top managerial competency (Kor, 2003) or investment in firm-specific human capital that can enhance the quality of decision-making (Mahoney & Kor, 2015). Governance is particularly important to firms in less competitive industries (Giroud & Mueller, 2011) or in family-controlled firms . Importantly, good governance provides legitimacy to managerial actions (Lipton & Lorsch, 1992;Aguilera & Jackson, 2003) such that investors feel protected from management consuming private benefits of control. The extent of this legitimacy can differ across countries depending on laws, culture and levels of corruption (Judge, Douglas, & Kutan, 2008).
A growing number of studies suggest that firmlevel governance mechanisms are institutionally embedded (e.g., Aguilera & Jackson, 2003;Bell et al., 2014;McCahery, Sautner, & Starks, 2017), and their functioning as well as organizational impact may be different, even in country settings that appear similar legally. This leads to two significant extensions of previous research based on a universalistic agency framework. First, governance problems at the firm level are not universal; they may differ depending on the firm's institutional environment. Second, the effectiveness of governance remedies aimed at mitigating agency conflicts may depend on formal and informal institutions. ''Law and finance'' research has made the first inroads into exploring how national settings may lead to different firm-level governance models around the world.
In seminal papers, La Porta, Lopez-de-Silanes, , 1998 and La Porta, Lopez-de-Silanes, Pop-Eleches, & Shleifer (2004) suggest that legal origin is influential in a nation's protection of outside investors (investors other than management or controlling shareholders), which the authors suggest is largely the purpose of corporate governance. Though legal tradition (''common law'' and ''civil law'') succeeds in explaining many cross-sectional differences in corporate finance, critics argue that these broad categories belie the true complexity of a nation's legal system. The US and UK economies serve as a good example. While both countries belong to the same ''Anglo-Saxon'' model of corporate governance, describing their legal environment solely as common law ignores differences in formal and informal ''rules of the game'' that may significantly impact the forms and efficacy of corporate governance mechanisms in the two countries. Consistent with this notion, Short & Keasey (1999) suggest that managers in the UK become entrenched at higher ownership levels than managers in the US. They attribute this difference to better monitoring and fewer firm-level takeover defenses in the UK. Bruton et al. (2010) and Cumming & Walz (2010) show that performance outcomes of ownership concentration and retained ownership by private equity investors may differ depending on the legal system and institutional characteristics of the private equity industry in a specific country.
Characteristics of Boards of Directors, such as goals, structure and representation may likewise be expected to differ across institutional contexts, even within broad institutional categories. Wymeersch (1998), for example, finds that in some countries, the law does not specifically dictate the role of the board of directors, so its priorities may well differ from the typical shareholder wealth maximization. Regarding board structure, some jurisdictions have two-tier boards while others have unitary boards. Rose (2005) suggests that the unitary (or one-tier) boards are typically from common law nations and two-tier boards predominate in civil law nations, however, Danish firms have adopted aspects of both. Moreover, O'Hare (2003) suggests that there may be an increase in oversight if firms with unitary systems change to a two-tier structure. Regarding representation on boards, nations differ with regard to their take on the wisdom of including directors that are insiders versus outsiders (Adams & Ferreira, 2007) as well as local versus global (Masulis et al., 2012).
A large literature, much of it in the accounting field, suggests that information environment, which includes the extent of corporate disclosure, reporting standards, the reliability of financial reporting, etc., is important to corporate governance (Bushman, Piotroski, & Smith, 2004;Leuz & Wysocki, 2016). Corporate disclosure of information through publicly accessible accounting statements serves to enhance investor trust (Bushman & Smith, 2001). Much of this literature examines the use of financial accounting in managerial incentive contracts. This research has been examined in the context of takeovers (Palepu, 1986), boards of directors , shareholder litigation (Skinner, 1994) and debt contracts (Smith & Warner, 1979). The worldwide adoption of International Financial Reporting Standards has been an important development in this literature and has motivated research in this area. The positive impact of enhancing reporting standards around the globe is arguably evidence consistent with the notion that disclosure is an important mechanism in corporate governance.
Related to both the finance and accounting literature, the legal structure in a nation plays a central role in corporate governance of firms. Though firms may adapt to poor legal environments individually (Coase, 1960), research suggests that regulation leads firms to develop good governance. Mandatory disclosure can serve to reveal the true quality of a firm overall, and even managers at that firm (Wang, 2010). Firms can opt into regulatory environments by bonding to external legal environments that enhance legal requirements (e.g., with cross-listing) or opt out through going private, delisting or even foreign incorporation.
Much of this literature examines changes in regulation in the US such as Regulation Fair Disclosure and Sarbanes-Oxley, but there are some international studies, such as Leuz, Nanda, & Wysocki (2003) and Dyck & Zingales (2004) that corroborate the positive association between corporate governance and a legal system that mandates disclosure. Some studies highlight the costs of regulation, both direct and indirect (e.g., Coates & Srinivasan, 2014), suggesting that the mandatory nature of disclosure is not as straightforward as its relation to corporate governance might imply.
To summarize, prior law, economics, finance and IB studies not only explore efficiency and effectiveness of various governance practices, but also identify significant national differences in how these practices are implemented at the firm level. In the following sections, we take this collective body of research a step further and discuss how national differences may facilitate or create barriers for the mobility of governance practices across national borders.

MOBILITY OF GOVERNANCE
An integration of the mainstream IB research with institutional theory from finance, law and economics, provides new interesting dimensions to the discussion of corporate governance mobility. Traditional IB studies have identified how different forms of institutional distance may affect the way MNCs tap into international factors markets and develop their strategies in terms of global diversification of their product and services (Brouthers, 2002;Tihanyi, Griffith, & Russell, 2005). What is not clear, however, is how these institutional factors may affect the exporting of governance and its implications.
Given the predominant focus in extant literature on internal, organizational aspects of corporate governance, there is limited prior work on potential roles of the firm's institutional environments in terms of their impact on the link between governance factors, international business strategy and ultimately performance. Aguilera & Jackson (2003), for example, suggest that because business organizations are embedded in different national institutional systems, they will experience divergent degrees of internal and external pressures to implement a range of governance mechanisms that are deemed efficient in a specific national context. Therefore contrary to the universalistic predictions of agency-grounded research, different social, political and historic macro-factors may lead to the institutionalization of very different views of firms' role in society as well as what strategic actions and their outcomes should be considered as acceptable.
More recent sociology-grounded research suggests that governance is a product not only of coordinative demands imposed by market efficiency, but also of rationalized norms legitimizing the adoption of appropriate governance practices (Bell et al., 2014). Legitimacy is the ''generalized perception or assumption that the actions of an entity are desirable, proper, or appropriate, within some socially-constructed system of norms, values, beliefs, and definitions'' (Suchman, 1995, p. 574). This perspective focuses less attention on the individual efficiency outcomes of structural governance characteristics that are at the core of agency perspective, and instead concentrates more on theoretical efforts to understand how governance mechanisms affect the firm's legitimacy through perceptions of external assessors, or the stakeholder ''audiences''.
Research within institutional theory and social psychology fields differentiates between various types of legitimacy judgments that include, in addition to instrumental (pragmatic), also cognitive and moral dimensions. More specifically, institutional theorists predict that regulative, normative and cognitive institutions put pressure on firms to compete for resources on the basis of economic efficiency. However, institutional pressures may also compel firms to conform to expected social behavior and demands of a wider body of stakeholders. In other words, the ability of organization to achieve social acceptance will depend on, in addition to efficiency concerns, the ability of its governance systems to commit to stewardship management practices, stakeholders' interests, and societal expectations.
These theoretical arguments may have far-reaching implications for corporate governance in an IB context. First, the firm's quest for legitimacy may lead to changes in its corporate governance practices and processes. For example, some firms, in addition to enhancing the monitoring capacity of boards, may also incorporate stakeholder engagement mechanisms into their formal governance structures by assigning responsibility for sustainability to the board and forming a separate board committee for sustainability. Consistent with this notion, the co-determination system of corporate boards in Germany ensures that representatives of key stakeholders, including employees, have a direct say in governance matters. A system of remuneration that involves not only financial performance benchmarks, but also factors associated with longer-term sustainability may be another governance factor contributing to moral legitimacy. Similarly, some companies introduce wider performance criteria and definitions of risk in their risk-movement systems that use non-financial indicators. Therefore unlike studies in finance, economics, and strategy fields, institutional framework considers corporate governance as an endogenous, socially-embedded mechanism that may be highly responsive to various legitimacy pressures (Filatotchev & Nakajima, 2014).
These arguments shed new light on our notion of internationally mobile corporate governance by suggesting that firms may adjust their governance mechanisms strategically when venturing into overseas factor and product markets. For example, Moore, Bell, Filatotchev, & Rasheed (2012) advance a comparative institutional perspective to explain capital market choice by firms going public via initial public offering (IPO) in a foreign market. Based on a sample of 103 US and 99 UK foreign IPOs during the period 2002-2006, they find that internal governance characteristics (founder-CEO, executive incentives, and board independence) and external network characteristics (prestigious underwriters, degree of venture capitalist syndication, and board interlocks) are significant predictors of foreign capital market choice by foreign IPO firms. Their results suggest foreign IPO firms select a host market where its governance characteristics and third party affiliations fit the host market's institutional environment. The basis for evaluating such fit is the extent to which isomorphic pressures exist for firm attributes and characteristics to meet legitimacy standards in host markets. Thus differences in internal governance characteristics and external ties are associated with strategic capital market choices such that an increased fit results in a higher likelihood of choosing one market over another. In other words, when firms select between different stock markets for their foreign IPO, they try to ''import'' governance standards that they perceive as more legitimate by investors in a specific market. These findings are particularly important given that Syvrud, Knill, Jens, & Colak (2012) find that, on average, foreign IPOs result in less proceeds.
Further, research by Bell et al. (2014) focuses on legitimacy in the stock market, where investor perceptions of the foreign IPO firm's overall legitimacy fall at the intersection of the cognitive and regulatory institutional domains. These domains are aligned with the firms' governance bundle and its home country legal environment, respectively. IPO firms originating from countries with institutional environments granting weak minority shareholder protections, such as China or Russia, will have to adopt a larger number of governance practices to gain the same level of legitimacy as IPOs from strong governance jurisdictions. This international mobility of firm-and macro-level governance factors can go both ways.
In a more recent paper, Krause, Filatotchev, & Bruton (2016) observe that institutional characteristics of foreign product markets influence the structure of boards of directors of US firms active in these markets. They argue that allocating greater, outwardly visible power to the CEO will build the firm's legitimacy among customers who are culturally more comfortable with high levels of power distance. Scholars rarely conceptualize boards as tools firms can use to manage product markets' demand-side uncertainty, but the results of this study suggest they should. Further, existing research in comparative corporate governance (e.g., Aguilera & Jackson, 2003) has argued that national institutions affect firm-level governance mechanisms, but this research also focuses almost exclusively on home country institutions. Clearly, institutional characteristics of foreign product markets can also have an effect on a firm's governance, even if the firm is incorporated and headquartered in the United States.
To summarize, the legitimacy perspective suggests novel dimensions to the notion of corporate governance mobility. From the agency perspective, MNCs may export/import corporate governance to obtain access to superior resources and achieve efficiency outcomes. For example, by importing foreign directors, firms in emerging markets can gain access to enhanced managerial expertise and monitoring capabilities that may help them to be more competitive in an international market (Giannetti, Liao, & Yu, 2015). In addition, from an institutional perspective, MNCs may adjust their governance systems to adhere to expectations and governance standards in a foreign product and factor markets, and therefore increase their legitimacy among local stakeholders, including investors and customers. These two perspectives differentiating between efficiency and legitimacy are not orthogonal, and the extent of governance mobility is determined by a complex interplay of firm-and industry-level factors, as well as financial, legal and cognitive institutions in the home and host countries.
Institutional factors may also create significant barriers for corporate governance mobility. In terms of formal institutions, differences in national governance regulations may impede a transfer of governance practices across national borders. For example, until recently the Chinese government imposed restrictions on foreign ownership of local companies that had a limiting effect on how much influence Western institutional investors may have when deciding on various governance matters. Differences in informal institutions, such as culture, may also create barriers for the transfer of governance when, for example, imported governance practices are not considered locally as legitimate. Cultural differences influence governance not only directly, but also indirectly through its influence over time in shaping institutions. For example, culture can influence governance and other managerial decision-making through beliefs or values that influence individual agents' perceptions, preferences, and behaviors. As a result, culture ultimately affects the utilities of agent's choices, both at the individual level and-as frictions are always present-at the firm and national levels, when local players may have difficulties adopting best governance practices due to behavioral and cognitive biases. Culture also affects governance and managerial decision-making by influencing national institutions, which can be viewed as a path-dependent result of cultural influences and historical events (David, 1994). Recent examples surround governance tensions in Japan, China and other South-East Asia economies between local investors on one hand, and foreign board members and CEOs coming from the Western economies, indicating that cultural differences may create barriers for the transfer of ''good governance'' concepts that local participants in corporate governance mechanisms find difficult to accept. Although our emphasis here was on how institutional factors may facilitate the transfer of corporate governance, institutional barriers to this transfer represent an important but relatively less explored area.

SPECIFIC MODES OF TRANSFERRING GOVERNANCE
If the firm-level corporate governance structures and their organizational outcomes in terms of strategies and performance are institutionally embedded, then the extent of governance mobility as well as its effects on exporting/receiving firms is far from universal. They may depend on institutional differences in home/host locations. Exactly how institutional factors affect the mobility of corporate governance and its implications depends on firm-level corporate governance, the mode(s) in which corporate governance is transferred, and the institutional environments from and to which governance is transferred.
The mobility of governance depends on the mechanisms used partly because there is differential evidence on the extent to which governance can be learned, copied, or imitated. Consistent with this notion, Doidge, Karolyi, & Stulz (2007) find significant heterogeneity in firm-level corporate governance within countries. Prior research has shown that investors themselves learn about the value of governance, and as such the returns to investment based on governance disappear over time. Indeed, Subramanian (2004) shows that the advantages to incorporating in Delaware differ across small versus large firms and disappear over time (counter to Daines, 2001). Bebchuk, Cohen, & Wang (2013) show that the value of the Gompers et al. (2003) governance index in predicting stock returns over time disappears as investors learn about the value of such governance; that is, the price of well governed stocks goes up and the returns go down. Nevertheless, while investors appear to learn about the value of governance, it is difficult for some firms to observe, learn, and adopt best practices in governance due to differences in internal process of the firm, behavioral and cognitive biases which limit the ability to copy well (Amin & Cohendet, 2000;Klapper & Love, 2004). Learning is local, requires skill acquisition, acclimation to the right mindset, interactions with the right people, and a thirst for external reputation. Also, learning requires overcoming bad governance. For example, Romano (2005) suggests that there are mistakes made by policymakers when they adopt minimum governance standards. Policy implications on governance standards is a partisan topic, however. Involved in these policies are two controversial topics: globalization versus nationalization, and government involvement in the corporate world. The law and economics/finance literature is fairly consistent in their conclusion that legal institutions, both public and private (La Porta et al., 2006;Jackson & Roe, 2009;Cumming, Knill, & Richardson, 2015), are good for firm access to capital and financial development in general.
Consistent with this notion, policymakers who find this research compelling should support legislation supporting the exporting or importing of good corporate governance, especially in nations where legal institutions are lacking.
At the same time, fairly recent events, such as the Great Recession, ''Brexit'' in the UK and an increase in the popularity of nationalism among citizens in some nations have moved some policymakers to take a more protective stance with regard to foreign ownership. As international trade and capital flows contract, the International Monetary Fund acknowledges that globalization is not without risks. Taking into consideration both of these trends, it is difficult to discuss with any specificity global policy implications.
The popularity of the international M&A literature has been growing markedly over time. Figure 1 shows that articles that reference international business in general have declined over time relative to articles that reference international acquisitions, shareholder rights, and creditor rights. Some key papers in the literature on international M&As and related topics of loans and creditor rights are summarized in Table 1. Esty & Megginson (2003), Bae & Goyal (2009), Haselmann, Pistor, & Vig (2010, Cumming, Lopez-de-Silanes, McCahery, & Schwienbacher (2015), and Qi, Roth, & Wald (2017) show that loan structures and debt tranching depend significantly on creditor rights and shareholder rights. In turn, international M&As, which are often financed with significant leverage, depend on access to debt finance and international levels of creditor and investor protection. Bris & Cabolis (2008) and Martynova & Renneboog (2008) find evidence that the cross border mergers have a higher impact on target firms share prices in countries with better investor protection, and when the target is from a country of better investor protection. In the context of leveraged buyouts (LOBs), however, Cao, Cumming, & Qian (2014) find evidence that cross-border LBOs are more common from strong creditor rights countries to weak creditor rights countries. Further, LBO premiums are lower in countries with stronger creditor rights and lower among cross-border deals. Cao, Cumming, Goh, & Qian (2015) show that the impact of country-level investor protection on deal premiums is stronger for LBO than non-LBO transactions.
Two papers in this Special Issue contribute to this literature on cross-border M&As. Ellis et al. (2017) show that acquirers benefit from good country governance, such that the acquirer's stock price reaction to acquisitions increases with the country level governance distance between the acquirer and the target. Renneboog et al. (2017) examine the impact of M&As on bondholders. Bondholder returns are larger in countries with stronger creditor rights and more efficient claims enforcement. These papers are important, as they show that the country-level distance between the acquirer and target affects the magnitude of transfer of governance, and this benefit is shared by shareholders and bondholders alike. Table 2 highlights key papers in the literature on foreign ownership, foreign political connections, and foreign directors. Figure 2 shows that these topics have been substantially increasing in popularity over time, in contrast to work on directors more generally for example, which has been in relative decline in recent years. Foreign investors focus on different types of stocks, as shown in early work by Kang & Stulz (1997). Foreign investors do not destabilize markets (Choe, Kho, & Stulz, 1999). Foreign investment reduces the cost of capital (Stulz, 1999), and financial integration across countries lowers transactions costs and greater economic welfare (Martin & Rey, 2000), even though foreign money managers have transaction costs disadvantages (Choe, Kho, & Stulz, 2005). Foreign investors increase the expected value of private firms backed by venture capitalists (Cumming, Knill, & Syvrud, 2016), The positive effect of foreign ownership on firm value has been attributed to larger shareholders and higher long term commitment and involvement of such shareholders (Douma, George, & Kabir, 2006); however, in some cases international ownership is associated with deficient environmental standards (Dean, Lovely, & Wang, 2009).
Cross-listing enables foreign ownership, and firms to bond to higher governance standards abroad to take advantage of more stringent securities laws in a host country's capital markets (Coffee, 2002;Doidge, Karolyi, & Stulz, 2004;Doidge et al., 2007;Karolyi, 2012;Pagano, Roell, & Zechner,  Market Condition Variables When the bidder is from a country with a strong shareholder orientation (relative to the target), part of the total synergy value of the takeover may result from the improvement in the governance of the target assets.
In full takeovers, the corporate governance regulation of the bidder is imposed on the target (the positive spillover by law hypothesis). In partial takeovers, the improvement in the target corporate governance may occur on a voluntary basis (the spillover by control hypothesis). The data corroborate both spillover effects. In contrast, when the bidder is from a country with poorer shareholder protection, the negative spillover by law hypothesis states that the anticipated takeover gains will be lower as the poorer corporate governance regime of the bidder will be imposed on the target. The alternative bootstrapping hypothesis argues that poor-governance bidders voluntarily bootstrap to the better-governance regime of the target. The data do not support this bootstrapping effect Variables for Acquirer and Target, Differences in Country Level Governance between Acquirer and Target, Economic Conditions, Industry Dummies Acquirers can transport the benefits from good country governance, so that they gain more from acquiring targets with worse country governance than their own. The acquirer's stock-price reaction to acquisitions increases with the country governance distance between the acquirer and the target 2002). But the bonding explanation is incomplete as not all firms desire to cross-list (Coffee, 2002), and there is still a large effect of local national governance on firm value amongst firms that do cross-list (Cumming, Hou, & Wu, 2017). International adoption of other jurisdictions' monitoring technology (Cumming & Johan, 2008) and regulations (Cumming, Johan, & Li, 2011) can enable the international transfer of governance and superior stock market outcomes such as new listings and liquidity. Regulators adopt from other jurisdictions monitoring technology (Cumming & Johan, 2008) and regulations (Cumming et al., 2011) that enable superior governance and stock market outcomes. The mobility of governance is also facilitated by the increasing internationalization of the investor base. Specifically, global investors include sovereign wealth funds (SWFs), such as United Arab Emirates's Abu-Dubai Investment Authority. SWFs may enforce governance standards in their portfolio firms that are different to the general governance practices in a specific location (Knill, Lee, & Mauck, 2012). Moreover, SWFs have a differential preference for private firms without a stock exchange listing, particularly in countries with lower legal standards (Johan, Knill, & Mauck, 2013), where the lack of transparency is suggestive of greater agency problems. Once companies become publicly listed, there is substantially more information released to the market, depending on the legal and cultural factors in a particular country (Boulton, Smart, & Zutter, 2017).
Another mechanism that can transfer governance includes CEO migration. MNCs can export monitoring technology and similar practices across national borders, and CEOs that have experience in foreign countries with stronger institutional environments may transfer knowledge about good governance (Cumming, Duan, Hou, & Rees, 2015). Generally, internal control systems and processes can be learned, therefore they are transferable/exportable, particularly in the context of emerging markets (Hoskisson, Eden, Lau, & Wright, 2000;John & Senbet, 1998).
Further, foreign directors represent another channel of governance mobility as they may bring good governance standards from their home countries to the focal firm, especially if it is located in a country with low governance standards (Giannetti et al., 2015). Foreign directors have been shown to positively impact firm performance (Choi, Park, & Yoo, 2007), particularly when foreign directors have higher levels of foreign degrees and political    Furthermore, corporate governance improves and firms are more likely to make international acquisitions, to export, and to raise funds internationally connections (Rhee & Lee, 2008). There is some contrasting evidence, however, that while foreign directors make better M&A decisions, they are less often engaged in firm activities thereby worsening performance and requiring more earnings restatements, among other problems (Masulis et al., 2012). Four important papers in this Special Issue contribute to the literature on foreign investors, foreign directors, and political connections. Aguilera et al. (2017) show that, in the presence of foreign investors, managers tend to be more optimistic in their early earnings forecasts, but have more long-term and timely adjustments relatively and avoid making last minute decisions. Calluzzo et al. (2017) show that sovereign wealth funds are attracted to firms that are more engaged in campaign finance, and hence can have a political influence in the target firm's country. Sojli & Tham (2017) show that foreign political connections create large increases in firm value, improve access to foreign markets, and improve access to government contracts. Foreign board members coming from countries with more advanced institutions may export good governance to a local firm operating in a relatively less advanced institutional environment, and this improvement may be stronger when institutional differences between ''exporting'' and ''importing'' countries are high (Miletkov et al., 2017). These papers show that the identity of foreign owners is significant and may have interplay with foreign directors and political connections, and can substantially influence the governance and performance of firms in different institutional environments. All of these papers show that governance is mobile and a key competitive advantage.
Last but certainly not least, it is important to note that bad governance is also internationally mobile. Allred, Findley, Nielsen, & Sharman (2017) show that many firms flaunt international standards by setting up internationally shell corporations. Even among OECD countries, there are substantial numbers of shell companies that are not compliant with international standards. Tax haven based firms, by contrast, are more compliant with international standards. The popularity of research on shell companies is growing significantly (Fig. 1). Future research could continue to seek a better understanding of the causes and consequences of these shell companies.

DISCUSSION AND CONCLUSIONS
Our review of the literature suggests that mobility of corporate governance is very context specific in respect of the country level institutional conditions as well as the mode of international governance transfer. Insights into the causes and consequences of firm-specific international governance transfer can be gleaned from interdisciplinary analyses involving law, finance, management and related fields. There is a massive scope for further work on topic that makes use of these interdisciplinary perspectives that we have highlighted here.
In this introduction, we specifically emphasized four main ways in which governance is internationally mobile: international M&As, foreign investors, foreign directors, and foreign political connections. These related topics are the focus of the important papers in this Special Issue. As a limitation we note that these four channels are not the only ways in which governance practices may be transferred across countries. For example, prior studies identify other channels of the transfer of corporate governance, such as the proliferation of governance codes around the globe and the harmonization of accounting standards, which have been discussed in the related literature. Future IB studies should develop a more holistic picture of the mobility of corporate governance by looking at these diverse channels.
Examining multi-stakeholder perspective may reveal new important dimensions of the mobility of corporate governance, bearing in mind that the traditional view of corporate governance is heavily anchored on mechanisms for solving agency problems arising from conflicting interests between top management and outside shareholders. Debates about US-based board governance, including its optimal size, composition, and independence, are largely influenced by this convention. However, agency conflicts arising from other stakeholders have implications for the design of corporate governance intended to solve managerial agency problems. For instance, in an environment where we also have debt agency problems (Djankov et al., 2008), an optimally designed corporate board should represent a balance between the interests of outside shareholders and outside debtholders. Debtholder representation on the board is observed frequently outside the U.S. and U.K. corporate sectors, and future research may explore how some elements of the multi-stakeholder governance model can be transmitted from one country to another within the context of MNE global operations.
The papers in this Special Issue highlight important managerial and policy implications associated with the mobility of governance. International acquisitions benefit both acquirer and target firms, and particularly those firms with a greater institutional distance between them (Ellis et al., 2017;Renneboog et al., 2017). Foreign investors affect managerial behavior (Aguilera et al., 2017), and can have a political influence (Calluzzo et al., 2017). Foreign political connections positively affect firm value (Sojli & Tham, 2017). Foreign directors can positively affect firm value, particularly in countries with weak legal standards (Miletkov et al., 2017). The only negative aspect of mobility of governance is seen with the establishment of shell companies that are common and not compliant with international standards (Allred et al., 2017). Policymakers should work to encourage mobility of governance. At the same time, regulators could further cooperate to enforce international standards to prevent improper governance standards from being transferred across countries. Given recent events such as the Global Financial Crisis and all of its implications, this balance in policy could prove particularly challenging.
The impact of financial regulation on governance is particularly important in the contest of financial firms. To the extent that countries and regions vary in terms of regulatory schemes, the governance structure varies accordingly. Again, this is one example where the interaction between multiple agents and stakeholders matters in the design and mobility of governance. In fact, the design of bank management compensation and its incentive features play a vital role in the design of optimal banking regulation (John, Saunders, Senbet, 2000). Traditional banking regulation focuses on a twoparty game with conflicting interests between the bank and the regulator. However, bank management is the key decision maker, and the bank risk incentives depend on the incentive structure of bank management compensation. John et al. (2000) show that, if these incentive features (e.g., bonus, salary, equity participation) are an input to the pricing of deposit insurance, an optimal banking regulation can be designed. Thus, the transmission mechanisms for governance mobility are broader when financial firms are considered. They arise from cross-border regulation and regulatory coordination.
In addition, development partners, as well as international financial institutions, such as the IMF and World Bank, can be transmission sources of governance for developing economies. This arises partly through technical assistance in financial sector development programs, but extends into non-financial firms as well. The quality of corporate governance is among the design features in the reform of financial systems in developing countries. This suggests an interesting research question into the relationship between governance and financial development with a focus on low income countries.
To conclude, this Special Issue poses important questions for corporate governance researchers in all of the respective fields, including IB, finance, economics, accounting and law. With the growing scale and scope of internationalization of business activities, the challenges facing executives in the global arena are considerably more demanding than those encountered in a domestic environment. The global context increases the diversity of stakeholders whose interests must be considered as well as the complexity of the governance problems facing MNCs and their leaders. Furthermore, companies competing in the global marketplace face a fundamental dilemma -how to balance the need for global consistency in corporate governance practices with the need to be sensitive to the demands and expectations of local stakeholders (Filatotchev & Stahl, 2015). Finding the appropriate balance between these competing demands is not always easy, and papers in this Special Issue help to map out future research directions in this increasingly important field.
ABOUT THE AUTHORS Douglas Cumming JD., Ph.D., CFA, is a Professor of Finance and Entrepreneurship and the Ontario Research Chair at the Schulich School of Business, York University. Douglas has published over 140 articles in leading refereed academic journals in finance, management, and law and economics, such as the Academy of Management Journal, Journal of Financial Economics, Review of Financial Studies, Journal of Financial and Quantitative Analysis, and the Journal of Empirical Legal Studies, and authored and edited over a dozen books with Oxford and Wiley, among others. He is the Founding Editor of Annals of Corporate Governance, and Co-Editor of Finance Research Letters, and Entrepreneurship Theory and Practice, and has been a guest editor for numerous Special Issues of top journals. Douglas is the incoming Editor-in-Chief of the Journal of Corporate Finance, effective 2018. Douglas' work has been reviewed in numerous media outlets, including the Wall Street Journal, The Economist, The New York Times, Canadian Business, the Globe and Mail, the National Post, and The New Yorker. Lemma Senbet is the Executive Director of African Economic Research Consortium and on leave from the University of Maryland as the William E. Mayer Chair Professor of Finance. He has achieved global recognition for his extensive and widely cited contributions to corporate and international finance, which have appeared in such premier journals as Journal of Finance, Review of Financial Studies, and Journal of Business. He has been elected twice as director of the American Finance Association and is a past president of the Western Finance Association. He has been appointed to over a dozen journal editorial boards, including extended tenures with the Journal of Finance (12 years), Journal of Financial and Quantitative Analysis (6 years), and Financial Management (18 years). In 2006 he was named Editor (Finance), JIBS, and he served five years. He has advised the World Bank, the IMF, the UN, African Development Bank, and various governmental and private agencies in USA, Canada, and Africa on issues relating to financial sector reforms and capital market development.
Accepted by John Cantwell, Editor-in-Chief, 12 December 2016. This article was single-blind reviewed.