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What matters and for which firms for corporate governance in emerging markets? Evidence from Brazil (and other BRIK countries)

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  • Black, Bernard S.
  • de Carvalho, Antonio Gledson
  • Gorga, Érica
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    Abstract

    A central issue in corporate governance research is the extent to which “good” governance practices are universal (one size mostly fits all) or instead depend on country and firm characteristics. We report evidence that supports the second view. We first conduct a case study of Brazil, in which we survey Brazilian firms' governance practices at year-end 2004, construct a corporate governance index, and show that the index, as well as subindices for ownership structure, board procedure, and minority shareholder rights, predicts higher lagged Tobin's q. In contrast to other studies, greater board independence predicts lower Tobin's q. Firm characteristics also matter: governance predicts market value for nonmanufacturing (but not manufacturing) firms, small (but not large) firms, and high-growth (but not low-growth) firms. We then extend prior studies of India, Korea, and Russia, and compare those countries to Brazil, to assess which aspects of governance matter in which countries, and for which types of firms. Our “multi-country” results suggest that country characteristics strongly influence both which aspects of governance predict firm market value, and at which firms that association is found. They support a flexible approach to governance, with ample room for firm choice.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Corporate Finance.

    Volume (Year): 18 (2012)
    Issue (Month): 4 ()
    Pages: 934-952

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    Handle: RePEc:eee:corfin:v:18:y:2012:i:4:p:934-952

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    Web page: http://www.elsevier.com/locate/jcorpfin

    Related research

    Keywords: G18; G30; G34; G39; K22; K29; Brazil; Korea; India; Russia; Corporate governance; Boards of directors;

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    References

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    Cited by:
    1. Thomas O'Connor & Julie Byrne, 2013. "Governance and the corporate life-cycle," Economics, Finance and Accounting Department Working Paper Series n248-13.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
    2. Muravyev, Alexander & Talavera, Oleksandr & Weir, Charlie, 2014. "Performance Effects of Appointing Other Firms' Executive Directors to Corporate Boards: An Analysis of UK Firms," IZA Discussion Papers 7962, Institute for the Study of Labor (IZA).

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