Northwestern University - School of Law; Northwestern University - Kellogg School of Management; European Corporate Governance Institute (ECGI)
English version published in 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.
Black, Bernard S., The Corporate Governance Behavior and Market Value of Russian Firms
(Russian version). English version published in Emerging Markets Review, Vol. 2,
pp. 89-108, 2001. Available at SSRN: http://ssrn.com/abstract=367141 or http://dx.doi.org/10.2139/ssrn.367141