Which aspects of corporate governance do and do not matter in emerging markets

Bernard Black; Antonio Gledson de Carvalho; Vikramaditya Khanna; Woochan Kim; Burcin Yurtoglu

doi:10.1561/108.00000043

Which aspects of corporate governance do and do not matter in emerging markets

Bernard Black, Antonio Gledson de Carvalho, Vikramaditya Khanna, Woochan Kim, Burcin Yurtoglu^*

^*Corresponding author for this work

Pritzker School of Law

Research output: Contribution to journal › Article › peer-review

13 Scopus citations

Abstract

Well-constructed, country-specific “corporate governance indices” can predict higher firm values in emerging markets. However, there is little credible research on which aspects of governance drive that overall relationship. We study that question across four major emerging markets (Brazil, India, Korea, and Turkey). We build overall country-specific governance indices, comprised of indices for disclosure, board structure, ownership structure, shareholder rights, board procedure, and control of related party transactions. Disclosure (especially financial disclosure) predicts higher market value across all four countries. Board structure (principally board independence) has a positive coefficient in all countries and is significant in two countries. The other indices do not predict firm value. These results suggest that regulators and investors, in assessing governance, and firm managers, in responding to investor pressure for better governance, would do well to focus on disclosure and board structure.

Original language	English (US)
Pages (from-to)	137-177
Number of pages	41
Journal	Journal of Law, Finance, and Accounting
Volume	5
Issue number	1
DOIs	https://doi.org/10.1561/108.00000043
State	Published - Apr 20 2020

Funding

Corporate Governance Curriculum, Michigan Law School, Latin America Workshop on Law and Economics; Northwestern Law School, NYU/TAU Corporate Law Conference 2019, Oxford University, Surrey Business School, and Tel Aviv University Business School for comments. We thank Corporate Governance Forum of Turkey, Sabanci University (Istanbul) and WHU–Otto Beisheim School of Management for financial support. We are grateful to the Bovespa stock market, the Brazilian Comissao de Valores Mobiliarios, the Instituto Brasileiro de Governanca Corporativa, the (Indian) National Stock Exchange, the Bombay Stock Exchange, and the Indian Institute of Management, Bangalore for supporting our survey efforts, and to the Korea Corporate Governance Service for providing their survey results to us. De Carvalho acknowledges financial support from FAPESP (2016-06826-6).

Keywords

Boards of directors
Brazil
Corporate governance
Disclosure
India
Korea
Shareholder rights
Turkey

ASJC Scopus subject areas

Law
Finance
Accounting

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10.1561/108.00000043

Cite this

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abstract = "Well-constructed, country-specific “corporate governance indices” can predict higher firm values in emerging markets. However, there is little credible research on which aspects of governance drive that overall relationship. We study that question across four major emerging markets (Brazil, India, Korea, and Turkey). We build overall country-specific governance indices, comprised of indices for disclosure, board structure, ownership structure, shareholder rights, board procedure, and control of related party transactions. Disclosure (especially financial disclosure) predicts higher market value across all four countries. Board structure (principally board independence) has a positive coefficient in all countries and is significant in two countries. The other indices do not predict firm value. These results suggest that regulators and investors, in assessing governance, and firm managers, in responding to investor pressure for better governance, would do well to focus on disclosure and board structure.",

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N2 - Well-constructed, country-specific “corporate governance indices” can predict higher firm values in emerging markets. However, there is little credible research on which aspects of governance drive that overall relationship. We study that question across four major emerging markets (Brazil, India, Korea, and Turkey). We build overall country-specific governance indices, comprised of indices for disclosure, board structure, ownership structure, shareholder rights, board procedure, and control of related party transactions. Disclosure (especially financial disclosure) predicts higher market value across all four countries. Board structure (principally board independence) has a positive coefficient in all countries and is significant in two countries. The other indices do not predict firm value. These results suggest that regulators and investors, in assessing governance, and firm managers, in responding to investor pressure for better governance, would do well to focus on disclosure and board structure.

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Which aspects of corporate governance do and do not matter in emerging markets

Abstract

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Keywords

ASJC Scopus subject areas

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