2.2.4 External governance The strength of a firm's external governance environment is assumed to either complement or substitute for board level governance (Aguilera et al., 2015). The premise is that the strength of formal and informal institutions exerts (or relax) external scrutiny on the fiduciary responsibilities of board of directors, through greater accountability mechanisms, increased regulation, stringent disclosure regimes, and independent supervisory agencies (Kim & Ozdemir, 2014).
