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Predicting corporate governance in emerging markets

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  • Braga-Alves, Marcus V.
  • Morey, Matthew
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    Abstract

    This paper investigates what predicts corporate governance in emerging markets. Specifically, we examine what predicts governance changes and the level of governance itself. To conduct this study, we utilize a unique dataset from AllianceBernstein that consists of monthly firm-level corporate governance ratings for 24 emerging market countries for almost seven years. Since the AllianceBernstein ratings are time-series data, they allow us to determine the direction of change in a firm’s corporate governance, and the timing of these changes. Using these data, we find two main results. First, as firms grow they are more likely to improve their governance. Second, the level of political risk where the firm resides is negatively and significantly related to the level of firm governance but positively and significantly related to changes in firm governance. Hence, firm governance is better in countries with lower political risk but firms are more likely to improve their governance in countries with higher political risk.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0261560612000502
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of International Money and Finance.

    Volume (Year): 31 (2012)
    Issue (Month): 6 ()
    Pages: 1414-1439

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    Handle: RePEc:eee:jimfin:v:31:y:2012:i:6:p:1414-1439

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    Web page: http://www.elsevier.com/locate/inca/30443

    Related research

    Keywords: Corporate governance; Country risk; Emerging markets;

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    References

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    1. Atanasov, Vladimir & Black, Bernard & Ciccotello, Conrad & Gyoshev, Stanley, 2010. "How does law affect finance? An examination of equity tunneling in Bulgaria," Journal of Financial Economics, Elsevier, vol. 96(1), pages 155-173, April.
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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.

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