Corporate Governance Law Effect in Greece: Antecedents and Considerations

Legal initiatives have a significant impact on the inner and outer corporate environment. Recent scandals and developments have triggered a wave of regulative and voluntary initiatives to improve corporate governance (CG) quality. The legislators legislate, but how feasible, effective is the implementation of these laws and how congruent with the countries characteristics is under doubt. The paper argues that the Greek Law on Corporate Governance had no effect on the fundamental elements of the corporate environment. Seven hypotheses are test using three different econometric methodologies (Panel data, Probit and Ordinal Probit Regression) are used. The legalistic approach drives the corporation to a mechanistic compliance and hence looses the freedom to make innovative decisions (Donaldson, 2003) or create costs that do not have a positive impact on financial performance, organizational stability, etc. The paper pinpoints the legal disarrays and their impact on the firm and argues that there is a need for a new set of principles and laws that focus on the real issues of corporate governance rather than the size, structure and leadership of the administrating bodies or the disclosure mechanisms.