The Corporate Governance Behavior and Market Value of Russian Firms
Bernard S. Black
Northwestern University - Pritzker School of Law; Northwestern University - Kellogg School of Management; European Corporate Governance Institute (ECGI)
Emerging Markets Review, Vol. 2, pp. 89-108, 2001
I examine the relationship between corporate governance behavior and market value for a sample of 21 Russian firms. I use (1) fall 1999 corporate governance rankings for these firms, developed by a Russian investment bank, and (2) the "value ratio" of actual market capitalization to potential Western market capitalization for these firms, determined independently by a second Russian investment bank. The correlation between ln(value ratio) and governance ranking is striking and statistically strong: Pearson r = 0.90 (t = 8.97). A worst (51 ranking) to best (7 ranking) governance improvement predicts a 700-fold increase in firm value. These results are tentative because of the small sample. But they suggest that corporate governance behavior has a powerful effect on market value in a country where legal and cultural constraints on corporate behavior are weak.
This paper is a nearly final version of the published article. An earlier conference version of this article, with a smaller 16-firm sample, was published as Bernard Black, "Does Corporate Governance Matter? A Crude Test Using Russian Data", University of Pennsylvania Law Review vol. 149, pp. 2131-2150 (2001), available at http://ssrn.com/abstract_id=252706
A Russian translation of this paper is available at
Number of Pages in PDF File: 25
Date posted: March 23, 2001
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