Does corporate governance matter for developing countries? An overview of the Mexican case

This paper deals with the relationship between corporate governance practices and development within the context of transitional economies. It argues that corporate governance has become a key factor in promoting sustainable economic development. Evidence suggests that corporate governance matters more in emerging markets than in developed economies. First, it acts as a complement to an institutional and legal framework. Second, it constitutes a mechanism to control market failures, such as information asymmetries between managers and small shareholders. Third, it improves the functioning of credit institutions. Fourth, it acts as an important incentive for international and national investors. In summary, corporate governance is a key tool for the institutional development of a competitive and stable commercial and business environment. The article is organized in four sections: definition of corporate governance and corporate agency problem, arguments and empirical evidence about corporate governance as a development mechanism, analysis of the Mexican experience, and conclusions.