Methods for Multicountry Studies of Corporate Governance: Evidence from the BRIKT Countries (Expanded Working Paper)

Posted: 16 Dec 2015

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

Vikramaditya S. Khanna

University of Michigan Law School; European Corporate Governance Institute (ECGI)

Woochan Kim

Korea University Business School; European Corporate Governance Institute (ECGI); Asian Institute of Corporate Governance (AICG)

B. Burcin Yurtoglu

WHU - Otto Beisheim School of Management

Date Written: December 2015

Abstract

This document is an expanded working paper version of Black, de Carvalho, Khanna, Kim, and Yuroglu, Methods for Multicountry Studies of Corporate Governance: Evidence from the BRIKT Countries (2013), http://ssrn.com/abstract=2219525,which contains details on our governance indices and the five countries we study, and additional results, which were omitted from the main paper for space reasons.

A replication dataset, accompanying codebook, and replication statistical code for the article and the expanded working paper are available at http://ssrn.com/abstract=2503520.

We discuss empirical challenges in multicountry studies of the effect of firm-level corporate governance on firm value, focusing on emerging markets. We assess the severe data, “construct validity,” and endogeneity issues in these studies, propose methods to respond to those issues, and apply those methods to a study of five major emerging markets -- Brazil, India, Korea, Russia, and Turkey. We develop unique time-series datasets on governance in each country. We address construct validity by building country-specific indices which reflect local norms and institutions. These similar-but-not-identical indices predict higher firm market value in each country and when pooled across countries in firm fixed-effects (FE) and random-effects (RE) regressions. In contrast, a “common index” that uses the same elements in each country, has no predictive power. For the country-specific and pooled indices, FE and RE coefficients on governance are generally lower than in pooled OLS regressions; and coefficients with extensive covariates are generally lower than with limited covariates. These results confirm the value of using FE or RE with extensive covariates to reduce omitted variable bias. Bounds on sensitivity to omitted variable bias suggest that individual country results are often fragile.

Keywords: Brazil, Korea, India, Russia, Turkey, corporate governance, boards of directors, disclosure, shareholder rights, sensitivity bounds

JEL Classification: G18, G30, G34, G39, K22, K29

Suggested Citation

Black, Bernard S. and De Carvalho, Antonio Gledson and Khanna, Vikramaditya S. and Kim, Woochan and Yurtoglu, B. Burcin, Methods for Multicountry Studies of Corporate Governance: Evidence from the BRIKT Countries (Expanded Working Paper) (December 2015). Available at SSRN: https://ssrn.com/abstract=2359126

Bernard S. Black (Contact Author)

Northwestern University - Pritzker School of Law ( email )

375 E. Chicago Ave
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Antonio Gledson De Carvalho

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

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Sao Paulo 01313-902
Brazil
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Vikramaditya S. Khanna

University of Michigan Law School ( email )

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European Corporate Governance Institute (ECGI) ( email )

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Woochan Kim

Korea University Business School ( email )

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Seoul, Seoul 136701
+822-3290-2816 (Phone)
+822-922-7220 (Fax)

HOME PAGE: http://biz.korea.ac.kr/professor/wckim

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Asian Institute of Corporate Governance (AICG) ( email )

1, 5-ga, Anam-dong
Sungbuk-gu
Seoul, 136-701
Korea, Republic of (South Korea)

B. Burcin Yurtoglu

WHU - Otto Beisheim School of Management ( email )

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Vallendar, 56179
Germany
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+49 261 6509-729 (Fax)

HOME PAGE: http://www.whu.edu/forschung/fakultaet/finance-group/corporate-finance/

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