Does Corporate Governance Reform Necessarily Boost Firm Performance? Recent Evidence from Russia
AbstractThis paper examines whether the introduction of corporate governance (CG) reforms in general and that of transparency and disclosure (T&D) rules in particular can necessarily boost firm performance. Existing literature suggests that CG reforms can boost performance because it can resolve the conflict of interest between the controlling and the minority owners, especially in societies with highly skewed distribution of ownership. We however argue that the success of CG reform would, in addition, depend on whether the reforms may initiate further conflict, e.g., that between the state and the controlling owners. Using recent data from Russia for 2000-2008, we find that the introduction of corporate governance codes in Russia had limited success to improve indices of firm performance in our sample. We argue that this arises from the predatory behavior of the central and local governments: greater transparency make businesses easy targets for aggressive tax enforcement policy by the central government while the decentralized local governments may increase the bribe price to protect businesses from high central taxes, which may also induce some businesses to go underground, thus harming firm performance.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6519.
Length: 36 pages
Date of creation: Apr 2012
Date of revision:
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Other versions of this item:
- Mihails Kuznecovs & Sarmistha Pal, 2011. "Does Corporate Governance Reform Necessarily Boost Firm Performance? Recent Evidence from Russia," CEDI Discussion Paper Series 11-06, Centre for Economic Development and Institutions(CEDI), Brunel University.
- G3 - Financial Economics - - Corporate Finance and Governance
- K2 - Law and Economics - - Regulation and Business Law
- P2 - Economic Systems - - Socialist Systems and Transition Economies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-08 (All new papers)
- NEP-BEC-2012-05-08 (Business Economics)
- NEP-IUE-2012-05-08 (Informal & Underground Economics)
- NEP-PBE-2012-05-08 (Public Economics)
- NEP-TRA-2012-05-08 (Transition Economics)
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