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.
Which Aspects of Corporate Governance Do and Do Not Matter in Emerging Markets
We thank Humberto Gallucci, Pranav Garg, Lorena Keller, Terence Leong, and Joelson Sampaio for research assistance and Yakov Amihud, Oded Cohen, and workshop participants at Boston College Finance Department, ETH Zurich Center for Law and Economics, Global 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 Governanc˛a 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).
Black B, de Carvalho AG, Khanna V, Kim W, Yurtoglu B (2020), "Which Aspects of Corporate Governance Do and Do Not Matter in Emerging Markets". Journal of Law, Finance and Accounting, Vol. 5 No. 1 pp. 137–177, doi: https://doi.org/10.1561/108.00000043
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