What Matters and for Which Firms for Corporate Governance in Emerging Markets? Evidence from Brazil (and Other BRIK Countries)
Bernard S. Black
Northwestern University - School of Law; Northwestern University - Kellogg School of Management; European Corporate Governance Institute (ECGI)
Antonio Gledson De Carvalho
Fundacao Getulio Vargas School of Business at Sao Paulo
Yale Law School
nearly final version, published in 18 Journal of Corporate Finance 934-952 (2012)
ECGI - Finance Working Paper No. 306/2011
Northwestern Law & Econ Research Paper No. 09-20
U of Texas Law, Law and Econ Research Paper No. 152
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, predict 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.
Number of Pages in PDF File: 44Accepted Paper Series
Date posted: May 18, 2011 ; Last revised: August 7, 2013
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