What Matters and for Which Firms for Corporate Governance in Emerging Markets? Evidence from Brazil (and Other BRIK Countries)

50 Pages Posted: 18 May 2011 Last revised: 4 Dec 2018

See all articles by Bernard S. Black

Bernard S. Black

Northwestern University - Pritzker School of Law

Antonio Gledson De Carvalho

Fundacao Getulio Vargas School of Business at Sao Paulo

Érica Gorga

São Paulo Law School of Fundação Getulio Vargas FGV DIREITO SP; Yale University - Center for the Study of Corporate Law

Date Written: July 1, 2012

Abstract

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.

Suggested Citation

Black, Bernard S. and De Carvalho, Antonio Gledson and Gorga, Érica and Gorga, Érica, What Matters and for Which Firms for Corporate Governance in Emerging Markets? Evidence from Brazil (and Other BRIK Countries) (July 1, 2012). nearly final version, published in 18 Journal of Corporate Finance 934-952 (2012), European Corporate Governance Institute (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, Available at SSRN: https://ssrn.com/abstract=1832404

Bernard S. Black

Northwestern University - Pritzker School of Law ( email )

375 E. Chicago Ave
Chicago, IL 60611
United States
312-503-2784 (Phone)

Antonio Gledson De Carvalho (Contact Author)

Fundacao Getulio Vargas School of Business at Sao Paulo ( email )

R. Itapeva, 474 - 7o. andar
Sao Paulo 01313-902
Brazil
+5511 3281-7767 (Phone)

Érica Gorga

Yale University - Center for the Study of Corporate Law ( email )

127 Wall Street
New Haven, CT 06511
United States
203-988-6500 (Phone)

HOME PAGE: http://www.law.yale.edu/faculty/EGorga.htm

São Paulo Law School of Fundação Getulio Vargas FGV DIREITO SP ( email )

R. Rocha, 233, Bela Vista
São Paulo, 01330-000
Brazil

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