What matters and for which firms for corporate governance in emerging markets? Evidence from Brazil (and other BRIK countries)

Bernard S. Black*, Antonio Gledson de Carvalho, Érica Gorga

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

75 Scopus citations

Abstract

A central issue in corporate governance research is the extent to which "good" governance practices are universal (one size mostly fits all) or instead depend on country and firm characteristics. We report evidence that supports the second view. We first conduct a case study of Brazil, in which we survey Brazilian firms' governance practices at year-end 2004, construct a corporate governance index, and show that the index, as well as subindices for ownership structure, board procedure, and minority shareholder rights, predicts higher lagged Tobin's q. In contrast to other studies, greater board independence predicts lower Tobin's q. Firm characteristics also matter: governance predicts market value for nonmanufacturing (but not manufacturing) firms, small (but not large) firms, and high-growth (but not low-growth) firms. We then extend prior studies of India, Korea, and Russia, and compare those countries to Brazil, to assess which aspects of governance matter in which countries, and for which types of firms. Our "multi-country" results suggest that country characteristics strongly influence both which aspects of governance predict firm market value, and at which firms that association is found. They support a flexible approach to governance, with ample room for firm choice.

Original languageEnglish (US)
Pages (from-to)934-952
Number of pages19
JournalJournal of Corporate Finance
Volume18
Issue number4
DOIs
StatePublished - Sep 2012

Keywords

  • Boards of directors
  • Brazil
  • Corporate governance
  • India
  • Korea
  • Russia

ASJC Scopus subject areas

  • Business and International Management
  • Finance
  • Economics and Econometrics
  • Strategy and Management

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