What Matters and for Which Firms for Corporate Governance in Emerging Markets? Evidence from Brazil (and Other BRIK Countries)

What Matters and for Which Firms for Corporate Governance in Emerging Markets? Evidence from Brazil (and Other BRIK Countries)

Bernard Black, Antonio Gledson de Carvalho, Érica Gorga

Series number :

Serial Number: 
306/2011

Date posted :

July 01 2011

Last revised :

November 28 2018
SSRN Share

Keywords

  • Brazil • 
  • Korea • 
  • India • 
  • Russia • 
  • Corporate governance • 
  • boards of directors • 
  • minority shareholders

A central issue in corporate governance research is the extent to which “good” governance practices are universal (one size mostly fits all) or instead depend on country and firm characteristics. We report evidence that supports the second view.

We first conduct a case study of Brazil, in which we survey Brazilian firms’ governance practices at year-end 2004, construct a corporate governance index, and show that the index, as well as subindices for ownership structure, board procedure, and minority shareholder rights, predict higher lagged Tobin’s q. In contrast to other studies, greater board independence predicts lower Tobin’s q. Firm characteristics also matter: governance predicts market value for nonmanufacturing (but not manufacturing) firms, small (but not large) firms, and high-growth (but not low-growth) firms. We then extend prior studies of India, Korea, and Russia, and compare those countries to Brazil, to assess which aspects of governance matter in which countries, and for which types of firms. Our “multi-country” results suggest that country characteristics strongly influence both which aspects of governance predict firm market value, and at which firms that association is found. They support a flexible approach to governance, with ample room for firm choice.

Published in

Published in: 
Publication Title: 
Journal of Corporate Finance
Description: 
Pages 934-952 (2012)

Authors

Real name: 
Fellow, Research Member
Northwestern University Law School and Kellogg School of Management Law School
Real name: 
Antonio Gledson de Carvalho
Real name: 
Érica Gorga