Is Corporate Governance Relevant During the Financial Crisis? Cross-Country Evidence

44 Pages Posted: 28 Mar 2011

See all articles by Kartick Gupta

Kartick Gupta

University of South Australia

Chandrasekhar Krishnamurti

University of South Australia

Alireza Tourani-Rad

Auckland University of Technology - Faculty of Business & Law

Date Written: March 22, 2011

Abstract

We study the impact of internal corporate governance on performance during the current financial crisis using a comprehensive cross-country sample of 4046 publicly traded non-financial firms from 23 countries. Using a broad-based index of corporate governance quality, we find that well-governed firms do not outperform poorly governed firms. We explore two plausible explanations for the lack of significant impact of corporate governance quality on performance. First, we examine whether cross-country differences in institutional development have an impact on the effect of corporate governance on performance. Second, we investigate whether a narrowing down of the informationally efficient segment of the market during the crisis can explain the results. We do not find support for either of these conjectures. Our work suggests that existing corporate governance arrangements do not go far enough in mitigating steep declines in performance during the global financial crisis.

Keywords: Corporate Governance, Global Financial Crisis, Stock Return Performance

JEL Classification: G15, G34, F30

Suggested Citation

Gupta, Kartick and Krishnamurti, Chandrasekhar and Tourani-Rad, Alireza, Is Corporate Governance Relevant During the Financial Crisis? Cross-Country Evidence (March 22, 2011). Available at SSRN: https://ssrn.com/abstract=1792948 or http://dx.doi.org/10.2139/ssrn.1792948

Kartick Gupta (Contact Author)

University of South Australia ( email )

37-44 North Terrace, City West Campus
Adelaide, South Australia 5001
Australia
+61 8 830 27179 (Phone)

HOME PAGE: http://people.unisa.edu.au/Kartick.Gupta

Chandrasekhar Krishnamurti

University of South Australia ( email )

37-44 North Terrace, City West Campus
Adelaide, South Australia 5001
Australia

Alireza Tourani-Rad

Auckland University of Technology - Faculty of Business & Law ( email )

3 Wakefield Street
Private Bag 92006
Auckland Central 1020
New Zealand

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