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Corporate Governance and Firms' Market Values: Time Series Evidence from Russia

  • Bernard S. Black

    ()

    (University of Texas at Austin)

  • Inessa Love

    ()

    (The World Bank)

  • Andrei Rachinsky

    ()

    (New Economic School/CEFIR)

There is increasing evidence that broad measures of firm-level corporate governance predict higher share prices. However, almost all prior work relies on cross-sectional data. This work leaves open the possibility that endogeneity or omitted firm-level variables explain the observed correlations. We address the second possibility by offering time-series evidence from Russia for 1999-present, exploiting a number of available governance indices. We find an economically important and statistically strong correlation between governance and market value in OLS with firm clusters and in firm random effects and firm fixed effects regressions. We also find significant differences in the predictive power of different indices, and in the components of these indices. How one measures governance matters.

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Paper provided by Center for Economic and Financial Research (CEFIR) in its series Working Papers with number w0053.

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Length: 40 pages
Date of creation: Nov 2005
Date of revision:
Handle: RePEc:cfr:cefirw:w0053
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  1. Black, Bernard, 2001. "The corporate governance behavior and market value of Russian firms," Emerging Markets Review, Elsevier, vol. 2(2), pages 89-108, June.
  2. Durnev, Art & Kim, E. Han, 2004. "To Steal or Not to Steal: Firm Attributes, Legal Environment, and Valuation," CEI Working Paper Series 2004-7, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
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