We introduce the topic of this Special Issue of the Journal of Corporate Finance on corporate governance of a multinational enterprise with a particular emphasis on the theoretical and empirical gaps in prior finance and international business studies associated with corporate governance problems and the effectiveness of governance solutions in the context of diverse institutional settings. We integrate analysis of the accepted articles with existing research on international corporate governance and global strategy. Overall, the work in this area continues to emphasize the importance of institutions, legal environment and culture in all aspects of global enterprises. We conclude the article with suggestions for future research in this rapidly expanding and important area of global business.

We explore differences in the levels of dispersed ownership that lead to a returns-based free float hedging factor in addition to size, which augments the capital asset pricing model (CAPM) in explaining the cross-section of stock returns . Using the S&P 1500 stocks in the US between 1985 and 2023, the results support the advantages of free float within a three-factor CAPM including size over alternative models based on liquidity, book-to-market value, and momentum. We argue that this yields a useful means for hedging effectively against the risks associated with the fundamental underlying likelihood of expropriation in a specific firm based on its ownership structure.

We extend the domain of liability of foreignness (LOF) research to capital markets and evaluate whether firms incur LOF when attempting to raise debt capital abroad. We rely upon multiple conceptualizations of institutional distance to capture the extent to which distance may contribute to LOF in capital markets. Based on a sample of 361 firms from 45 countries over a 24year time period, we find that institutional distances lead to increased cost of debt. More importantly, we find that frequency of foreign bond issuance helps to mitigate the LOF. We conclude with a discussion of our results and their implications for future research on understanding how firms address LOF when sourcing debt abroad.

This study examines the extent to which principal–principal agency conflicts within venture capital (VC) syndicates lead to additional principal–agent conflicts in IPO firms in two institutional contexts. Using a matched sample of 274 VC-backed IPOs in the US and the UK, it shows that the diversity of a VC syndicate increases pre-IPO discretionary current accruals, used as a proxy for earnings management, but the impact of such diversity is higher in the US. There is also evidence of higher underpricing and lower aftermarket performance in firms with higher earnings management and VC diversity, and these negative performance effects are also higher in the US. Our findings indicate that local and informal institutions have a significant effect on multiple agency conflicts in IPO firms and performance outcomes.