The Corporate Governance Behavior and Market Value of Russian Firms
English version published in Emerging Markets Review, Vol. 2, pp. 89-108, 2001
24 Pages Posted: 23 Jan 2003
I examine the relationship between corporate governance behavior and market value for a sample of 21 Russian firms. I use (1) fall 1999 corporate governance rankings for these firms, developed by a Russian investment bank, and (2) the "value ratio" of actual market capitalization to potential Western market capitalization for these firms, determined independently by a second Russian investment bank. The correlation between ln(value ratio) and governance ranking is striking and statistically strong: Pearson r = 0.90 (t = 8.97). A worst (51 ranking) to best (7 ranking) governance improvement predicts a 700-fold increase in firm value. These results are tentative because of the small sample. But they suggest that corporate governance behavior has a powerful effect on market value in a country where legal and cultural constraints on corporate behavior are weak.
The Russian version of this paper is available below. The English version is available at: http://ssrn.com/abstract_id=263014
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