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Emerging Markets Corporate Governance Research Network Newsletter, February 2013

In our 10th issue you will once again find the latest research papers, opinions pieces, news and upcoming events. We interviewed Viral Acharya from NYU Stern School of Business and he commented about political influences on state-owned enterprises. There are interesting articles on the determinants of corporate governance quality in emerging markets, the evolution of corporate governance in Brazil, and the new regulations on mandatory electronic voting at general meetings in Turkey. As always, we present stimulating reports, news and events.


CG Insights Series – Is Political Influence on State-Owned Enterprises the True Obstacle to Private Sector Growth in Emerging Markets?


Viral V. AcharyaViral V. Acharya is the C.V. Starr Professor of Economics in the Department of Finance at New York University Stern School of Business. This is an abbreviated version, read the full interview here.

The most interesting piece on corporate governance I read recently was….

A paper by several Indian academics on the difference in the behavior of independent directors in India before the 2009 Satyam scandal.  The findings suggest that concerns about personal liability and the increased risk of law suits if the company engages in fraudulent or other inappropriate activity contributed to the flight of independent directors from poorly governed firms. more

Right now, I am working on…

A study that looks at the role of the dominant shareholder in state-owned banks, and how these dominant shareholders - the state - could be creating inefficiencies in the market because their focus might not be on maximizing shareholder value. Instead, their priorities are entwined with the political agenda of the moment. It builds on my earlier research in which my co-author and I conclude that during the financial crisis in 2008, investors rewarded Indian public sector firms that had greater systemic risk while penalizing private sector firms with similar risk. We attributed this finding to the explicit and implicit government backing of public sector banks, which do a lot of priority sector lending. more

I think the most relevant CG research topic for emerging markets now is…

This issue of the political economy and its influence over the actions of the dominant shareholder in state-owned enterprises, leading to market inefficiencies.  Might this be the true bottleneck to private sector growth in emerging markets? The approach of favoring certain sectors due to the political exigencies of the moment - by controlling the actions of the dominant shareholder - could restrict the amount of credit available for other sectors. And particularly given the limited budgets of emerging market countries, this potentially could constrain economic growth, or contribute to lopsided development. more


Read the full answers and comments here.




Which Does More to Determine the Quality of Corporate Governance in Emerging Economies, Firms or Countries?
Andrea Hugill and Jordan Siegel
Hugill and Siegel of Harvard Business School shed new light on the comparative impacts of country and firm-specific characteristics on firms’ corporate governance practices in emerging markets. As opposed to prior findings, the authors find that firm-specific characteristics are more important determinants of corporate governance ratings than country specific characteristics.


The Evolution of Corporate Governance in Brazil
Bernard S. Black, Antonio Gledson de Carvalho, and Joelson Oliveira Sampaio
Using three hand-collected surveys, the authors portray the significant improvement of corporate governance in Brazil between 2004 and 2009. They use a Brazilian Corporate Governance Index (BCGI) to proxy for changes in corporate governance. BCGI is comprised of six indices covering major aspects of corporate governance (board structure, board procedure, related party transactions, ownership structure, shareholder rights and disclosure). The improvements is due to two main factors: the growth in Novo Mercado and Level II listings, mainly through the entry of new firms with high corporate governance practices (IPOs) and the improvement in the governance practices of the firms that were already listed.


Value Creation and Value Capture in Corporate Governance: Using the Value-Based Approach to Analyze an Ownership Reform of China’s Listed Firms
Nan Jia, Jing Shi, Yongxiang Wang, and Yongxiang Wang
This is the first study in the literature to apply the value-based approach for investigating corporate governance and it has important implications for emerging markets. Although the main focus in corporate governance reforms in emerging markets is to achieve higher firm value by protecting minority shareholders, the authors show that minority shareholders can be empowered to obtain greater protection, as their ex ante compensation essentially comes from the private gains that block shareholders who would otherwise keep to themselves ex post.


The Determinants of Director Remuneration in West Africa: The Impact of State versus Firm-Level Governance Measures
Bruce Allen Hearn
Bruce Allen Hearn from University of Sussex contrasts the influences of firm-level and state-level governance measures on directors’ self-rewarding behavior measured by their remuneration. Using a unique hand-collected sample of West African firms, he finds that larger board sizes are less effective governance mechanisms while enhanced expropriation of private benefits of control is closely associated with lower government promotion of private sector policies, media and analyst freedom and corruption control.


Audit Quality and Corporate Governance: Evidence from the Microfinance Industry
Leif Atle Beisland, Roy Mersland, and R. Øystein Strøm
This study uses a unique, hand-collected sample of microfinance institutions from 73 countries to analyze the relationship between audit quality and governance mechanisms. The authors depict that the presence of internal auditors is related to other indicators of stricter governance, whereas the use of Big Four auditors is generally unrelated to other control mechanisms. There is no association between audit quality and governance; instead, the relationships between these two characteristics are dependent on the specific mechanism that is investigated. However, for situations in which a significant relationship between audit quality and governance does exist, the sign of this relationship is positive.


Opinion and Commentary

Istanbul Stock Exchange Moves First on Mandatory Electronic Voting at General Meetings of Shareholders
Melsa Ararat and Muzaffer Eroglu
After a recent law change in Turkey investors are now allowed to electronically participate and vote at general assemblies. The Financial Times refers to this regulation as a coup for international institutional investors with Turkish holdings as it increases the transparency of ISE listed companies and empowers them to embrace an activist approach. Ararat and Eroglu reflect upon the impacts of this law change and argue what needs to be done further.


Five Questions about SRI – Weekly Expert Interview
Emerging Markets ESG
Interview with Professor Anthony F. Buono, Founding Coordinator of Alliance for Ethics and Social Responsibility, Bentley University. Buono speaks about what distinguishes SRI from mainstream investment and how academic study, awareness, engagement and research at business schools influence the development of SRI in emerging markets.



India Proxy Season 2012 Analysis
InGovern Research Services
InGovern analyzes 2012 proxy voting season in India along with the influences of new regulatory changes such as increasing public float in listed companies and mandatory requirements. Also see a recent interview with Shriram Subramanian, the Founder of InGovern.


Singapore Named as Top Corporate Governance Nation in Asia
Barclay Simpson
Asian Corporate Governance Association names Singapore as the number one in the region.  Hong Kong, Thailand, Japan and Malaysia follow Singapore to form top five in the table. website also shared a video of Brendan Wood’s address at the SIAS 4th Asian Corporate Governance Conference 2012 in Singapore, discussing their shareholder confidence index.


Events and Calls for Papers

The 2013 Rotman ICPM Call for Research Proposals is now available. Phase 1 research proposal deadline is Monday, February 18, 2013.  Winners will be announced publicly in the Spring 2013 issue of the Rotman International Journal of Pension Management.


CalPERS has launched the Sustainable Investment Research Initiative and is issuing a call for papers for its upcoming Sustainability & Finance Symposium, which will take place on June 7, 2013. Submissions will be accepted through February 22, 2013.  


The Corporate Governance: An International Review is seeking paper submissions for a special issue conference on the “Global Perspectives on Entrepreneurship: Public and Corporate Governance.”  Special Issue Submission Deadline: April 1, 2013. The conference will be held on April 25-26, 2013 at the Schulich School of Business, York University, Canada.


The Center for Audit Quality (CAQ) offers funding on various audit quality related research topics. The number of projects selected for funding will depend on the quality and number of proposals received and the total dollar amount of funds requested. It’s anticipated that a total of $200,000 will be arranged to fund multiple projects during this submission period. For more information on the research areas and submission please email The deadline for proposal submission is Friday, March 1, 2013.


2013 International Corporate Governance Network (ICGN) Annual Conference will be held on June 26-28, 2013 in New York, the United States.

ICGN is also to offer two awards: the ICGN Alastair Ross-Goobey Memorial Scholarship and the ICGN – Deloitte Scholarship. The deadline for applications is March 1, 2013.


From Our Coordinator

We encourage all of our members to notify us regarding their ongoing research or the events or conferences they want to share with the Network. We also welcome other relevant information and your feedback. Please contact Mehmet Canayaz at

Melsa Ararat, EMCGN Coordinator   


February 2013


The Emerging Markets Corporate Governance Research Network is supported by the Global Corporate Governance Forum, the leading knowledge and capacity building platform dedicated to corporate governance reform in emerging markets and developing countries. The Forum is a multi-donor trust fund facility located within the IFC Corporate Governance Group, co-founded in 1999 by the World Bank and the Organisation for Economic Co-operation and Development (OECD). For more information about the EMCGN's activities, go to or contact


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