corporate governance reform

Top PDF corporate governance reform:

Market Discipline and EU Corporate Governance Reform in the Banking Sector: Merits, Fallacies, and Cognitive Boundaries

Market Discipline and EU Corporate Governance Reform in the Banking Sector: Merits, Fallacies, and Cognitive Boundaries

While some of these initiatives constitute a marked improvement over the shambolic structures governing banks in the recent past, they are bound to disappoint in terms of effectiveness. The reason for that is not a lack of good intentions on the part of the champions of corporate governance reform, but a number of fallacies in the analysis of the standard narrative. For example, it may be plausibly argued that no corporate governance model can work when the principal actors face severe limitations in their knowledge and understanding of risk due to objective factors, such as complexity, or lack of transparency in financial transactions. The interconnected and opaque structure of banks, the increasing complexity of their operations, and the short-termism of the financial sector Ð that is subject more than other sectors to fads, herding, and irrational mood swings Ð place insurmountable obstacles both to a boardÕs capacity to run the bank and shareholdersÕ ability to monitor them. 2 These limitations are compounded by more general cognitive boundaries facing shareholders and directors: so-called Ôbounded rationalityÕ. 3 Lender-of-last-resort facilities and the strong possibility of a public rescue further blunt the disciplining power of the market

25 Read more

European Corporate Governance Reform and the German Party Paradox  CES Germany & Europe Working Papers, No  03 1, 2003

European Corporate Governance Reform and the German Party Paradox. CES Germany & Europe Working Papers, No. 03.1, 2003

This paper is a contribution to the discussion of the impact of political variables on production regimes. An increasing part of the debate on national models of capitalism concerns the impact of party politics on the organization of production regimes and how this impact is mediated by such institutions as the elec- toral system and other features of majoritarian versus consociational democracies. Two different, but compatible and complementary ways of designing such research can be distinguished. The first way is to focus on macro variables such as consociational democracy and the organizational features of production regimes as a whole. For example, Gourevitch and Hawes (2002: 244–251) point out that most organized economies are consociational democracies, which can be explained by their tendency to include the inter- ests of labor into politics and by the absence of radical political shifts, which fits in with stable long-term relations between different stakeholder groups. An alternative way of connecting politics with production regimes is to deconstruct the concept of organized economies and to test the partisan hypothesis for dif- ferent subsystems of production regimes, countries, and points in history. Production regimes are con- glomerates of quite different features, such as the corporate governance sphere, industrial relations, com- petition policy, skill formation, and the welfare regime. It is an open question whether or not parties and political institutions affect different subsystems in the same way: obviously, leftist parties in government tend to favor more codetermination rights for employees than conservative and liberal parties do, but there is no way of concluding from this that leftists also favor a greater degree of organization for the cor- porate governance sphere. In addition, the impact of parties may differ from country to country, being de- pendent on different institutional settings and historical experiences.

33 Read more

European Corporate Governance Reform and the German Party Paradox  CES Germany & Europe Working Papers, No  03 1, 2003

European Corporate Governance Reform and the German Party Paradox CES Germany & Europe Working Papers, No 03 1, 2003

In order to understand the current trade union and SPD attitude toward interlocking, organized capital, it is crucial to conceive that these ideas were driven in new directions at two historical junctures. The Hil- ferding-Naphtali view on organized capitalism did not survive World War II. As to the collaboration of the center of interlocking capital with the Nazi regime and its important role in war preparation, the trade unions stopped their opposition to disentanglement. In their second nation-wide conference with represen- tatives from the different Allied occupied districts in December 1946, the trade unions expressed the view that “both world wars have shown that the war-enforcing pressure came from the concentration of capital- ist power in monopolies, cartels, trusts and horizontal economic groups and the malpractice of their power.” 24 In his famous speech at the Munich founding congress of the Federation of German Trade Un- ions in October 1949, trade union leader Hans Böckler declared, “it must never happen again that eco- nomic agglomerations, transformed into political power, destroy a democratic constitution, as happened to the Republic of Weimar” (Deutscher Gewerkschaftsbund 1989/1949: 202). Beside the nationalization of main industries, the trade unions called for a consistent disentanglement of capital in their first mani- festo (Leminsky/Otto 1974: 248) and, later, fiercely attacked both the reform of concentration and inter- locking capital that happened in the 1950s and the powerless anti-cartel policy of the Adenauer govern- ment. With respect to the 1957 Act Against Restraints of Competition (Gesetz gegen Wettbewerbsbe- schränkungen), the trade unions organized a mass demonstration in Dortmund in November 1958, voicing the opinion that “the concentration of economic power again starts to endanger the democratic state.” 25 In short, the trade unions had definitely ceased to favor interlocking capital over separated, competing eco- nomic units.

33 Read more

Corporate Governance and Capital Structure: Stock, Bonds and Substitution

Corporate Governance and Capital Structure: Stock, Bonds and Substitution

Studying the consistency of stock market development in Brazil allows us to consider the effects of corporate governance reform, and theories of rational expectations and capital structure. For this reason, this study aims to examine the association between debt and equity in such a context. Using data from 1993 to 2013, 171 Brazilian public companies were analysed with cointegration techniques (Johansen S. , 1988; Johansen & Juselius, 1990; Johansen S. , 1991). The results show that the Brazilian corporate governance reform has stimulated both stock and bond markets in a complimentary movement between debt and equity for companies that moved to or were created in the Novo Mercado listing segment. The findings reject the substitution hypothesis in Brazil.

25 Read more

The Reform of Corporate Governance in France

The Reform of Corporate Governance in France

attention to the gradual progress of a certain business administration network, and France has gone through a major reformation in respect of the decline in the number of crossed holdings, despite the discrepancies with other nations (ibid. 1999). Then, what the persistent consolidation of stockholding displays in relation to current trends of business management in France is not that they were inert, but that their development was path dependent. In some occasions, the pressure exercised by foreign shareholders on the business administration structure of family controlled enterprises was very powerful. This is illustrated by a review of the takeover attempt of Group André, instigated at the turn of the century by the French businessman Guy Wyser-Pratte and underpinned by a US trust company, NR Atticus (Albouy and Schatt, 2004). Once they obtained a sizable proportion through the Stock Exchange in Group André’s shareholding portfolio, twenty- five percent for a start, the American entrepreneurs overpowered the owners and enforced critical modifications in the organization of the executive committee. This case may well be taken as a guide for subsequent cases, with regard to the relevancy of French corporate governance, as being effectively protected from the pursuit of stockholder value in the financial markets. The fact that the Group André takeover bid was unprecedented in the French context when it happened makes it an organizational change of special prominence. It is interesting, that the main advocate of this course of action, Guy Wyser- Pratte, expressed unreservedly his view to drive the French mode of capitalism towards American principles (ibid. 2004).

114 Read more

Relationship between Corporate Governance and Firm Performance

Relationship between Corporate Governance and Firm Performance

It is a fact that the objectives pursued by shareholders and corporate managers tend to be differing and contradictory with regards to their own interests. Consequently, this has nurtured the conception of a wide spectrum of approaches and processes ensuring that conflicting interest’ spill-over are minimized. One of the compromises that have been given birth to address this divergence is corporate governance. At its very root, according to some researchers (Harris and Raviv, 2008, Larcker, Richardson and Tuna, 2007). The theoretical platform on which foundations of corporate governance is built is weak and as such finds itself deprived of any theoretical base. Tricker (2000) and Parum (2005) also have the same line of reasoning and conclude that studies carried out on corporate governance have not been consistent whether empirically, methodologically, or even theoretically. As such, a vast number of theoretical frameworks have seen the day, stemming from the fields of economics, finance, management or even sociology, so as to serve as a basis for researchers in their analysis of CG. Though to some (for instance Stiles and Taylor 2002 ), these piecemeal attempts

16 Read more

Evaluation of corporate governance practices in emerging markets (A case study of Nigerian Banking industry)

Evaluation of corporate governance practices in emerging markets (A case study of Nigerian Banking industry)

Similarly, the cases presented highlight selective valuation of loan portfolio by banks. These valuations were done without recourse to either the Nigerian accounting standards or CBN prudential guidelines which requires varying provisions required for various levels of bank credit. By classifying bad and or non-performing loans as if they were performing, banks were able to declare ‘super profits’ used to portray growth while further expropriating other share holders. As such super profits formed the basis on which dividends and performance bonuses are paid directors directly benefit from such wrong loan classifications. In most cases, these “paper profits” were converted to share loans without consent of shareholder. Where consent was obtained a review of shareholding rights indicate the existence of significant control by a group (proxies or cronies) of the shareholders. Hence these banks where able to circumvent governance provisions on disclosure of related party and making false renditions on financial statement positions. This calls as a whole to question the efficiency and technical competence of the board and audit committee as it indicates they were subject to manipulation and intimidation by dominant managers or group of shareholders. Although the code of governance has detailed responsibilities and functions of board members and organisational structures, in practise there is a failure to comply with them. This indicates the establishment of the governance structure is not aimed at fostering accountability but to legitimise the banks for continued existence.

39 Read more

Beyond shareholder primacy? Reflections on the trajectory of UK corporate governance

Beyond shareholder primacy? Reflections on the trajectory of UK corporate governance

Over time we should not be surprised to see a clearer articulation within UK corporate governance of the importance for companies of creating long-term stakeholder value. This does not mean that the UK will converge upon a set of stakeholder-orientated norms of the kind observed in mainland Europe and Japan. In the short run, as the system continues to be skewed towards shareholder interests, we may expect considerable turbulence and instability as the various corporate governance actors try to make the existing model work. Managers committed to a strategy of investing in stakeholder relations will try to convince shareholders that this is in their long-term interests. Shareholders, in turn, may be prepared to accept this logic. By these means, shareholder primacy could be transformed into a mechanism favouring a stakeholder-orientated approach. But there is nothing inevitable about this outcome and it remains the exception, not the rule, in current practice. Other options are open to companies and to policy-makers: these include replacing external investors with internal shareholders such as employees and suppliers, as in the Rover case, or going down the road of mutual or non-profit forms of corporate ownership. The diverse and possibly contradictory nature of these developments gives a foretaste of what is to come.

25 Read more

RISK AVERSION IN THE BOARD ROOM. AN ANALYTICAL APPROACH ON CORPORATE GOVERNANCE OF GERMAN STOCK-LISTED COMPANIES

RISK AVERSION IN THE BOARD ROOM. AN ANALYTICAL APPROACH ON CORPORATE GOVERNANCE OF GERMAN STOCK-LISTED COMPANIES

According to the agency theory, a positive relationship between company performance and good corpo­ rate governance should exist. A broader study of the author of this paper examines a sample of German stock–listed companies whereas Germany can be seen as one of the most highly regulated countries concerning corporate governance. The overall purpose of the author’s study is to analyze the effect of supervisory board characteristics and procedures on firm performance. Several corporate governance variables such as number of committees, board independency, supervisory board compensation, personal risk liability, etc. are examined regarding their effects on firm performance in terms of firm growth and profitability. Two different approaches were selected: (1) a quantitative data analysis, based on financial figures and corporate governance variables, and (2) a survey of supervisory board members out of this sample. The total sample consists of 128 German stock–listed companies. The financial data are obtained from the financial databases providers ThomsonOne and Morningstar. The corporate governance data are also collected from annual reports and from corporate governance compliance statements. According to the German Corporate Governance Codex (DCGK) each stock–listed company has to explain their com­ pliance with the DCGK rules. Thus, the DCGK represents a benchmark of good corporate governance and allows collecting objective and comparable quantitative data to estimate the corporate governance level. The main data analysis methods are bivariate analysis and tests for statistical differences (t–test), the latter in particular to find differences between groups clustered by their 5–years total shareholder return (TSR) growth resulting in a TSR top–30 group and TSR bottom–30 group. While the fulfilment of good corporate governance standards over all shows no significant effect on firm performance, this paper focusses on the findings that risk aversion in the board room is increasing as a result of governance regulations and that growth outperformers have a lower degree of risk aversion. It is concluded that an own–risk deductible in the D&O insurance policy leads to risk–averse supervisory board behavior and thus to lower TSR growth.

10 Read more

Industrial democracy and corporate governance: two discourses of reform in liberal market economies

Industrial democracy and corporate governance: two discourses of reform in liberal market economies

Hayek (1944, p.98) claimed in his Road to Serfdom that “what matters is that we have some choice”, that “there is almost always a way for the able” to leave a job that “becomes quite intolerable.” And similarly, in his recent book Democracy: Where and Where Not Gray (2011) considers the relationship of US business to American democracy purely in terms of whether corporations should be able to influence the political process - there seems to be a general lack of understanding in such works that democracy is not something necessarily external to the firm, but that it is something that can take place within it. As Ellerman (1990, p.32) has stressed, “[d]iscussions of corporate governance are often clouded by insufficient attention to the distinction between those who are governed by the corporation and those whose interests are only affected by the firm.” The fundamental question of political economy - how should we be governed? - seems to be absent from most debates in corporate governance. It is as if the concept of democracy has somehow become alien to the narrative tradition which obtains in corporate governance circles in the main liberal-market economies currently.

17 Read more

Impact of Capital Structure on Firm Performance: Moderating role of Corporate Governance

Impact of Capital Structure on Firm Performance: Moderating role of Corporate Governance

Capital structure and its impact on firm performance was a topic of interest for many researchers in developed countries. Different empirical findings motivated the researchers to work on this area of research. Capital structure and its impact on firm performance is also a topic of interest for developing countries as well, different dimensions of firm performance have been used in these studies. But a few researchers in developing countries specifically in Pakistan have used the Tobin’s Q as a firm performance measure. On the other hand corporate governance and its relationship with firm performance has been empirically tested by many researchers in developing and developed countries but up to knowledge of my extent no one has tested its moderating role on the relation of capital structure and firm performance in Pakistan. We also adopted an index of corporate governance to measure it, which is composite measure of corporate governance and help to measure it in most appropriate manner. Also a large number of firms have been chosen as sample of study, which is also an important addition in generalization of results because in previous studies limited numbers of firms were used as sample of the study. These are the reasons that motivate us to select this topic.

25 Read more

The continuing diversity of corporate governance: Theories of convergence and variety

The continuing diversity of corporate governance: Theories of convergence and variety

A vital dimension of the increasing financialisation of the world economy is the growth of capital markets, and especially the vast growth of equity markets, where volatility has been experienced at its furthest extremities. What this demonstrates is the overwhelming predominance of Anglo-American institutions and activity in world equity markets, and how to a great extent these markets reflect largely Anglo-American interests, as the rest of the world depends more on other sources of corporate finance. This pre-eminence of equity markets is a very recent phenomenon. Historically, the primary way most businesses throughout the world (including in the Anglo-American region) have financed the growth of their companies is internally through retained earnings. In most parts of the world until recently, this was a far more dependable source of capital rather then relying on equity markets. Equity finance has proved useful at the time of public listing when entrepreneurs and venture capitalists cash in their original investment, as a means of acquiring other companies, or providing rewards for executives through stock options. Equity finance is used much less frequently during restructuring or to finance new product or project development (Lazonick, 1992: 457). In Europe and the Asia-Pacific however, this capital was in the past provided by majority shareholders, banks, or other related companies (to the extent it was needed by companies committed to organic growth rather than through acquisition, and where executives traditionally were content with more modest personal material rewards than their American counterparts).

34 Read more

The political economy of corporate governance

The political economy of corporate governance

This functionalist understanding has been challanged from at least two angles. First, a number of studies that have explored the ascent of the shareholder value principle, or ‘shareholder value ideology’ (Lazonick and O’Sullivan, 2000). These studies suggest that the rise of shareholder value can be explained by the interaction of factors such as exogenous shocks, strategic action and academic idea production in the corporate governance field (see also Fligstein, 2001; Davis, 2009). Thus, the emergence of this new set of theoretical assumptions was not a functionalist response to competitive pressures, but rather reflected shifting power relations in the corporate governance field. When previous relative ‘outsiders’ such as corporate ‘raiders’ and institutional investors rose to prominence, they endorsed the development of a theory of corporate governance that gave primacy to their interests (Heilbron et al., 2014). Agency theory, developed in the 1970s (e.g. Jensen and Meckling, 1976), lived up to these aspirations and could thus give academic credence and legitimacy to the claims made by propagators of shareholder value (Fligstein, 2001; Veldman, 2013). Second, the literature on the diffusion of ‘good governance’ equally supports the argument that the development of contemporary corporate governance was an outcome of a political process. The initiation of changes in corporate governance theory and practice to some extent lead to changes in global and local power relations and social relations. However, the original ideas are also remoulded and sometimes decoupled from practice when meeting local resistance. Such a pattern is replicated in various national corporate governance systems, for example in Germany, Denmark and Japan (e.g. Mills and Weinstein, 2000; Yoshikawa and Phan, 2001; Rose and Meyer, 2003; Goergen et al., 2008). It is also observable in a variety of organizational and regulatory settings (e.g. Ezzamel et al., 2008; Morris et al., 2008; Jansson, 2013; Mehrpouya, 2015; Veldman and Willmott, 2015).

17 Read more

The political economy of corporate governance

The political economy of corporate governance

This functionalist understanding has been challanged from at least two angles. First, a number of studies that have explored the ascent of the shareholder value principle, or ‘shareholder value ideology’ (Lazonick and O’Sullivan, 2000). These studies suggest that the rise of shareholder value can be explained by the interaction of factors such as exogenous shocks, strategic action and academic idea production in the corporate governance field (see also Fligstein, 2001; Davis, 2009). Thus, the emergence of this new set of theoretical assumptions was not a functionalist response to competitive pressures, but rather reflected shifting power relations in the corporate governance field. When previous relative ‘outsiders’ such as corporate ‘raiders’ and institutional investors rose to prominence, they endorsed the development of a theory of corporate governance that gave primacy to their interests (Heilbron et al., 2014). Agency theory, developed in the 1970s (e.g. Jensen and Meckling, 1976), lived up to these aspirations and could thus give academic credence and legitimacy to the claims made by propagators of shareholder value (Fligstein, 2001; Veldman, 2013). Second, the literature on the diffusion of ‘good governance’ equally supports the argument that the development of contemporary corporate governance was an outcome of a political process. The initiation of changes in corporate governance theory and practice to some extent lead to changes in global and local power relations and social relations. However, the original ideas are also remoulded and sometimes decoupled from practice when meeting local resistance. Such a pattern is replicated in various national corporate governance systems, for example in Germany, Denmark and Japan (e.g. Mills and Weinstein, 2000; Yoshikawa and Phan, 2001; Rose and Meyer, 2003; Goergen et al., 2008). It is also observable in a variety of organizational and regulatory settings (e.g. Ezzamel et al., 2008; Morris et al., 2008; Jansson, 2013; Mehrpouya, 2015; Veldman and Willmott, 2015).

191 Read more

Does Governance Reform Help? The Impact of Split Share Structure Reform on Corporate Board Structure in Chinese Manufacturing Enterprises

Does Governance Reform Help? The Impact of Split Share Structure Reform on Corporate Board Structure in Chinese Manufacturing Enterprises

Table 3 shows the descriptive statistics of the full sample. In order to remove the effect of outliers and extreme values, all the variables used in this study were winsorized at 1 % in each tail of the distribution. The dependent variable, board size, has an average of around 9 to 10 people. The average proportion of independent directors is about 31%, which is a bit lower than the CSRC expected minimum of 33.3% of independent directors. This suggests that the Chinese corporate board is still dominated by insiders and that only about 3 out of 10 directors are independent, whereas in the developed countries, like the US, the corporate board is dominated by outsiders (Boone et al., 2007). The supervisory board in China has about 4 people, almost similar to the number of independent directors. On average, state ownership of about 27% is still retained in Chinese listed firms. The average ownership held by the largest shareholder is about 42%. Eleven out of 100 firms have the CEO duality phenomenon. The study also examined the correlations between the examined variables. We found the highest correlation coefficient to be 0.58, that between ownership concentration and firm age. The variance inflation factor has a mean value of 1.45, suggesting that multicollinearity is not a serious problem in this study.

17 Read more

Conceptual  Paper Entitled  “A Study on Corporate Governance in India”

Conceptual Paper Entitled “A Study on Corporate Governance in India”

Much of the trendy interest in company governance is concerned with mitigation of the conflicts of interests between stakeholders. In colossal companies where there is a separation of possession and administration and no controlling shareholder, the major–agent hassle arises between upper- administration (the "agent") which can have very extraordinary interests, and by means of definition substantially more know-how, than shareholders (the "principals"). The chance arises that, as an alternative than overseeing management on behalf of shareholders, the board of administrators may just end up insulated from shareholders and beholden to management. This side is specially reward in modern-day public debates and trends in regulatory policy.

6 Read more

Reform of Corporate Governance in the EU. CEPS Policy Brief No. 38, October 2003

Reform of Corporate Governance in the EU. CEPS Policy Brief No. 38, October 2003

In the area of company law, progress has been limited. The most important reform measures have failed after decades of efforts at harmonisation. Overall, the more they tried to harmonise “corporate governance” the less successful they were. One major proposal intended to harmonise company structures in the, now abandoned, 5th Company Law Directive. Another proposal aimed at easing cross-border mergers of companies (10th company law directive). The most publicised harmonisation effort has been the establishment of uniform rules for takeovers across the EU. This proposal attempted to create a “level playing field” through proportionality between risk-bearing capital and control, and introduced the break-through rule. Once again, the efforts to harmonise corporate governance structures and control systems have been blocked by the member states, each pursuing its own interests. The only real progress was the agreement on the regulation for a European company statute (Societas Europea, SE) in October 2001, which can in fact be considered a 16 th company law regime in the EU (see Box 1).

22 Read more

The power of meetings in corporate governance

The power of meetings in corporate governance

ascended his father’s (monarch) throne. In contrast, transfer of share ownership must be legally effected to adults who can take responsibilities of membership. 81 Further complexities arise from gratuitous transfer of shares in the company. The board of directors may acknowledge the transfer but until there is rectification of the register and entry of the shares the transfer of shares is void and inchoate. 82 Although, the law does not require any specific form for transfer of shares, the deceased must, at least, hand over the share certificate to a claimant/heir. 83 Inevitably, global socio-economic characteristics of impunity and corruption readily manifest in corporate decision making. Thus, there have been other cases where surviving directors have proceeded to appoint one associate to replace the deceased founder from outside, award themselves substantial remuneration and take decisions which required participation of directors representing the deceased founder. 84 The proper procedure is for the Administrators of the founder’s estates to have their names entered in the register of members. Once achieved, any meeting held without their notification becomes a nullity and the conduct of the majority will be deemed oppressive. 85 This is a crucial investor protection as derivative actions for breach of fiduciary duties can also be sustained. 86

9 Read more

Corporate Governance of SOEs and Performance in Transition Countries  Evidence from Lithuania

Corporate Governance of SOEs and Performance in Transition Countries Evidence from Lithuania

This paper investigates whether and to what extent corporate governance mechan- isms affect the efficiency of State Owned Enterprises (SOEs) operating in transition economies. Furthermore, it examines the relationship between corporate governance practice and its impact on both wholly state run SOEs and majority state run SOEs. We employed a unique dataset of corporate governance ratings (related to quality of transparency, quality of board, and quality of strategic planning, implementation and control) of commercial Lithuanian SOEs relating to the period following the intro- duction of the corporate governance reforms in the years 2012-2013. In order to in- vestigate our research hypotheses, we set up a two-stage empirical research strategy that combined a non-parametric efficiency estimator (i.e., Data Envelopment Analy- sis) with a bootstrapped truncated regression. We built two aggregate indexes of corporate governance ratings to represent one dimension of corporate governance quality. We then ran a battery of regressions using both the aggregated and the single corporate governance indexes as independent variables. First, the paper finds that the wholly state ownership model of SOEs is positively correlated to efficiency (i.e., wholly SOEs are more efficient than majority SOEs). Moreover, overall corporate governance practices are efficiency-enhancing; more specifically, board quality and strategic planning seem to be effective internal governance mechanisms in promot- ing overall organizational efficiency. Interestingly, we uncovered that there exists a relationship between concentration of ownership and corporate governance practic- es, but this mitigated efficiency enhancement in wholly state run SOEs compared to majority state run SOEs. This effect was driven by the lower quality of the board. Overall, our findings illustrate that corporate governance reforms have enhanced ef- ficiency, but wholly SOEs require a better implementation in order to achieve full ef- ficiency gains.

23 Read more

Methods for Multicountry Studies of Coporate Governance: Evidence from the BRIKT Countries

Methods for Multicountry Studies of Coporate Governance: Evidence from the BRIKT Countries

income/assets and EBIT/sales. Capital intensity and asset tangibility: Asset tangibility can both predict Tobin’s q and affect what type of governance a firm needs. We control for PPE/sales, capex/PPE, R&D/sales, and advertising/sales. Liquidity: annual share turnover (traded shares/total shares) and free float, since share prices may be higher for firms with more liquid shares. Ownership: fractional ownership by the largest shareholder, foreign investors, and the state. Product market competition, which can directly affect value and substitute for governance in imposing discipline on managers: exports/sales and domestic market share in the firm’s principal industry. With RE, we also use several firm-level variables which can predict both governance and q: Industry dummies, defined separately in each country (9 dummies for Brazil, 11 for India, 4-digit Korean SIC codes for Korea, and 2-digit US-equivalent SIC codes for Turkey. US cross-listing dummy and MSCI index dummy to proxy for liquidity and foreign investor interest. Business group dummy, because group firms may behave differently than stand-alone firms.

29 Read more

Show all 10000 documents...