Methods for Multi-country Studies of Corporate Governance: Evidence from the BRIKT Countries

Methods for Multi-country Studies of Corporate Governance: Evidence from the BRIKT Countries

Bernard Black, Antonio Gledson de Carvalho, Vikramaditya Khanna, Woochan Kim, Burcin Yurtoglu

Series number :

Serial Number: 

Date posted :

March 01 2014

Last revised :

March 21 2014
SSRN Suggested citation Download this paper Open PDF Share


  • Brazil • 
  • Korea • 
  • India • 
  • Russia • 
  • Turkey • 
  • Corporate governance • 
  • boards of directors • 
  • Disclosure • 
  • shareholder rights • 
  • sensitivity bounds

We discuss empirical challenges in multi-country studies of the effects of firm-level corporate governance on firm value, focusing on emerging markets. We assess the severe data, ?construct validity,? and endogeneity issues in these studies, propose methods to respond to those issues, and apply those methods to a study of five major emerging markets -- Brazil, India, Korea, Russia, and Turkey.

We develop unique time-series datasets on governance in each country. We address construct validity by building country-specific indices which reflect local norms and institutions. These similar-but-not-identical indices predict firm market value in each country, and when pooled across countries in firm fixed-effects (FE) and random-effects (RE) regressions. In contrast, a ?common index? that uses the same elements in each country, has no predictive power in FE regressions. For the country-specific and pooled indices, FE and RE coefficients on governance are generally lower than in pooled OLS regressions, and coefficients with extensive covariates are generally lower than with limited covariates. These results confirm the value of using FE or RE with extensive covariates to reduce omitted variable bias. We develop lower bounds on our estimates which reflect potential omitted variable bias.

Published in

Published in: 
Publication Title: 
Journal of Econometrics
Vol. 183, pages 230-240, 2014


Real name: 
Fellow, Research Member
Northwestern University Law School and Kellogg School of Management Law School
Real name: 
Antonio Gledson de Carvalho
Real name: 
Vikramaditya Khanna
Real name: 
Burcin Yurtoglu