Corporate Disclosure, Compliance and Consequences: Evidence from Russia
70 Pages Posted: 9 Aug 2018 Last revised: 9 Sep 2021
Date Written: September 08, 2021
Does the introduction of corporate transparency and disclosure rules affect compliance and therefore earnings quality and firm performance in emerging economies? We explore these questions for an important emerging economy, Russia, using a natural experiment, the 2002 introduction of Russian corporate governance code, to exploit the exogenous variation in voluntary disclosure. We find a significant increase in corporate disclosure among the domestic Russian firms over the period 2003-07 when firms gradually adopted some but not all disclosure rules. The immediate effect of the introduction was a drop in reported earnings. Market valuation, however, only improved for domestic firms after 2007, when all domestic firms had to comply. However, cross-listed firms, which were already satisfying international standards, remained largely unaffected. Though average compliance by domestic firms was only 53%, average firm value of treated domestic firms relative to cross-listed ones, went up by about 10%. Results are robust, confirm external validity and offer important policy implications for other emerging/ transition economies.
Keywords: Natural Experiment, 2002 Russian Corporate Governance Code, Earnings Management, Market Valuation, Difference-In-Difference Model, Domestic vs. Cross-Listed Firms, Russia
JEL Classification: G3, K2, O38
Suggested Citation: Suggested Citation