Which Aspects of Corporate Governance Matter in Emerging Markets: Evidence from Brazil, India, Korea, and Turkey

73 Pages Posted: 2 May 2015 Last revised: 18 Aug 2018

Bernard S. Black

Northwestern University - Pritzker School of Law; Northwestern University - Kellogg School of Management; European Corporate Governance Institute (ECGI)

Antonio Gledson De Carvalho

Fundacao Getulio Vargas School of Business at Sao Paulo

Vikramaditya S. Khanna

University of Michigan Law School

Woochan Kim

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

B. Burcin Yurtoglu

WHU - Otto Beisheim School of Management

Date Written: August 5, 2018

Abstract

There is evidence that some “corporate governance indices” predict higher firm values in emerging markets, but little evidence on which specific aspects of governance drive that overall relationship. We study that question across four major emerging markets (Brazil, India, Korea, and Turkey). We build overall country-specific governance indices, comprised of indices for disclosure, board structure, ownership structure, shareholder rights, board procedure, and control of related party transactions. We find that disclosure (especially financial disclosure) predicts higher market value across all four countries. Board structure (principally board independence) takes a positive coefficient in all countries and is significant in Brazil and Korea. The Disclosure Index, and a combined Disclosure-Board Structure Index, remain significant in lower bounds analyses. The other indices do not predict firm value. These results provide evidence that: (i) country-specific indices can outperform broad, one-size-fits-all indices, and (ii) firms, in responding to investor pressure for better governance; and investors, in assessing governance, would do well to focus on disclosure and board structure.

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

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, Which Aspects of Corporate Governance Matter in Emerging Markets: Evidence from Brazil, India, Korea, and Turkey (August 5, 2018). Northwestern Law & Econ Research Paper No. 14-22; European Corporate Governance Institute (ECGI) - Finance Working Paper No. 566/2018; U of Michigan Law & Econ Research Paper. Available at SSRN: https://ssrn.com/abstract=2601107 or http://dx.doi.org/10.2139/ssrn.2601107

Bernard S. Black

Northwestern University - Pritzker School of Law ( email )

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

Northwestern University - Kellogg School of Management

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-5049 (Phone)

European Corporate Governance Institute (ECGI)

Brussels
Belgium

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)

Vikramaditya S. Khanna

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States
734-615-6959 (Phone)

Woochan Kim

Korea University Business School ( email )

LG-POSCO Bldg #524
Anam-Dong, Seongbuk-Ku
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 ECARES ULB CP 114
B-1050 Brussels
Belgium

Asia Corporate Governance Institute (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 )

Chair of Corporate Finance
Burgplatz 2
Vallendar, 56179
Germany
+49 261 6509-721 (Phone)
+49 261 6509-729 (Fax)

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

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