Is Corporate Governance Ineffective in Emerging Markets?

42 Pages Posted: 17 Apr 2000

Date Written: June 2002


I test whether corporate governance is ineffective in emerging markets by estimating the link between CEO turnover and firm performance for over 1,200 firms in eight emerging markets. While previous papers on corporate governance in emerging markets have studied corporate governance mechanisms, such as concentrated ownership, I study a corporate governance outcome: are poorly performing managers replaced? Others have answered this question in the affirmative for the United States and other developed countries. This paper is the first to address this question for emerging markets. I find two main results. First, CEOs of emerging market firms are more likely to lose their jobs when their firm's performance is poor, suggesting that corporate governance is not ineffective in emerging markets. The magnitude of the relationship is surprisingly similar to what Kaplan (1994a) found for the United States. Second, for the subset of firms with a large domestic shareholder, there is no link between CEO turnover and firm performance. For this subset of emerging market firms, corporate governance appears to be ineffective.

Keywords: Management Turnover, Performance, Ownership Concentration

JEL Classification: G34, J63

Suggested Citation

Gibson, Michael S., Is Corporate Governance Ineffective in Emerging Markets? (June 2002). Available at SSRN: or

Michael S. Gibson (Contact Author)

Federal Reserve Board ( email )

Washington, DC 20551
United States
1-202-452-2495 (Phone)

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