Corporate Governance, Investor Protection and Performance in Emerging Markets

40 Pages Posted: 19 Mar 2002

See all articles by Leora F. Klapper

Leora F. Klapper

World Bank; World Bank - Development Research Group (DECRG)

Inessa Love

World Bank - Development Economics Data Group (DECDG)

Date Written: March 2002

Abstract

Recent research studying the link between law and finance has concentrated on country-level investor protection measures and focused on differences in legal systems across countries and legal families. Klapper and Love extend this literature and provide a study of firm-level corporate governance practices across emerging markets and a greater understanding of the environments under which corporate governance matters more. Their empirical tests show that better corporate governance is highly correlated with better operating performance and market valuation. More important, the authors provide evidence showing that firm-level corporate governance provisions matter more in countries with weak legal environments. These results suggest that firms can partially compensate for ineffective laws and enforcement by establishing good corporate governance and providing credible investor protection. The authors' tests also show that firm-level governance and performance is lower in countries with weak legal environments, suggesting that improving the legal system should remain a priority for policymakers.

This paper - a product of Finance, Development Research Group - is part of a larger effort in the group to study corporate governance around the world.

Keywords: Corporate Governance, International Finance, Law and Finance

JEL Classification: G3, F3

Suggested Citation

Klapper, Leora F. and Love, Inessa, Corporate Governance, Investor Protection and Performance in Emerging Markets (March 2002). World Bank Policy Research Working Paper No. 2818. Available at SSRN: https://ssrn.com/abstract=303979 or http://dx.doi.org/10.2139/ssrn.303979

Leora F. Klapper (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States
202-473-8738 (Phone)

HOME PAGE: http://econ.worldbank.org/staff/lklapper

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Inessa Love

World Bank - Development Economics Data Group (DECDG) ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

HOME PAGE: http://econ.worldbank.org/staff/ilove

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