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Emerging Markets Corporate Governance Research Network Newsletter, July 2013

In our 12th issue we once again present you the latest research papers, opinions, news and upcoming events! This issue includes an interview with Prof. Colin Mayer that sheds light on how emerging markets can benefit from right governance systems to reduce poverty and fuel economic development.


As a last reminder, 4th International Conference on Corporate Governance in Emerging Markets will be held on August 23-24, 2013 in Indian School of Business, Hyderabad, India. Dr. Steve Lydenberg, the founder of Domini Social Investments, will deliver a key note speech on Emerging Trends in Corporate Social Responsibility Data and Disclosure: Challenges and Opportunities whereas Professor Dr. Viral V. Acharya (New York University Stern School of Business) will deliver a key note on Private Firms, Public Firms, and the Financing of Innovation. The 4th Conference of our Network is taking place in an exciting time in the history of corporate governance research as empirical research on CG in emerging markets is reaching a tipping point. Supported by the National Stock Exchange of India and India’s New Stock Exchange, the conference will also feature a panel discussion and facilitate an exchange of opinions between scholars, the regulator and the practitioners on corporate governance in India. More information can be found on the conference website:



CG Insights Series - With the Right Governance System, Corporations Can be a Powerful Catalyst for Poverty Reduction and Economic Development in Emerging Markets


Colin Mayer is the Peter Moores Professor of Management Studies at the Saïd Business School. He is an Honorary Fellow of Oriel College, Oxford and of St Anne’s College, Oxford. Professor Mayer’s book  "Firm Commitment: Why the Corporation is Failing Us and How to Restore Trust in It" was recently published by Oxford University Press. This is an abbreviated version, read the full interview here.


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


...A paper by Robert Eccles, Ioannis Ioannou and George Serafim. The authors determine that companies that adopt stronger environmental, social and governance (ESG) policies display significantly superior performance over the long term, as measured by both stock market performance and accounting metrics. I think this paper offers the most persuasive evidence to date of the benefits of strong corporate governance and the positive impact of ESG on the financial performance of companies. More...


Right now, I am working on…


...Helping emerging market countries understand the role corporations can play in moving people out of poverty and contributing to sustainable, equitable growth, and how the corporate governance approach can either facilitate this or impede it. The governance system has to change and evolve along with the economy.


Let’s look at South Korea as an example. One of the reasons for South Korea's remarkable growth trajectory was the enabling governance environment that allowed family-owned companies to thrive. Today, however, there is growing concern around the concentration of control in a small number of family-owned firms, called chaebols. Issues include the limits to minority shareholder rights and the power of chaebols to stifle competition. In turn, this could be causing economic inefficiency, perhaps contributing to slowed growth. More...


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


...Matching governance systems to a country’s economic goals, to overall private sector expansion goals AND to the activities and ownership structures of individual corporations. Corporations can be a powerful force for development and growth in emerging markets and the governance system can be a driver of this powerful force. The  key is that it should be flexible enough to reflect the diversity of private sector activities in a country.

Let’s compare the UK and the US. In the US, it is much easier for firms to match their corporate governance arrangements to their corporate activities - for example, they can decide to incorporate in states that offer management protections against too much shareholder control and takeover threats, or in states that emphasize shareholder rights. The result is that US corporations have found a more appropriate balance between shareholder control and commitment to other parties than UK firms. This contributed to the success of the US in promoting diverse corporate activities, even as the governance conditions in the UK have factored into the marked decline in its large-scale manufacturing. This provides an interesting lesson for emerging market nations that are confronting these complexities now.  

Read the full interview




Independent Directors’ Dissent on Boards: Evidence from Listed Companies in China
Juan Ma and Tarun Khanna
Using a sample of Chinese firms the authors examine the circumstances under which independent directors voice their views on public boards. Among many results, the authors find that when independent directors dissent, they tend to offer mild, subjective justifications. Dissents are associated with breakdown of social ties between the independent director and the board chairperson, who is at the center of the board bureaucracy in China. Moreover, dissent is more likely to occur when the chairperson who appointed the independent director has left the board. As opposed to the conventional view that dissent might be reflective of diverse viewpoints and is beneficial, the authors find this offsetting beneficial effect to be not strong.


Is Corporate Governance in China Related to Performance Persistence?
Lars Helge Hass, Sofia Johan, and Denis Schweizer
In contrast to Gompers, Ishii, and Metrick (2003), which studies the impact of corporate governance on firm performance in the U.S., Hass, Johan and Schweizer investigate how different aspects of corporate governance affected performance persistence in Chinese firms between 2001 and 2011. A well-structured board with more independent directors, split positions for CEOs and the chairman, and smaller boards favor performance persistence. Furthermore, lower levels of state ownership and a non-concentrated blockholder structure are positively associated with performance persistence.


Corporate Governance Reforms around the World and Cross-border Acquisitions
E. Han Kim and Yao Lu
Kim and Lu provide a comprehensive documentation of major corporate governance reforms undertaken around the world from 1991 to 2007 and demonstrate how these reforms impacted foreign acquirers' cherry picking tendency in emerging markets through better investor protection. Recent studies demonstrate that cross-border acquisitions help spread corporate governance from strong to weak legal regimes, but Kim and Lu identify a critical distortion to these findings. They find that transmission of governance systems through cross-border acquisitions occurs mainly for better performing firms, leaving largely untouched poorly performing firms, which may be in greater need of governance improvement. They argue that the legal environments of capital-importing countries with weak investor protection should be improved in order to alleviate the distortion.


Former Politicians as Corporate Directors: Good for Business?
Stephen Gray, Iman Harymawan, and John Nowland
This paper investigates how employing former politicians impacts Australia's listed companies and sheds light also on potential research on political connections in the emerging markets. Using an event study methodology the authors show shareholders do not value the expertise that former politicians bring to corporate boards, particularly when their political parties are not in power and when they have less political and directoral experience.


Board Characteristics and Chinese Bank Performance
Qi Liang, Pisun Xu, and Pornsit Jiraporn
In accordance with the ongoing bank reform in China, the authors explore the board characteristics of Chinese banks and investigate how they affect performance and asset quality. Number of board meetings and the proportion of independent directors have significantly positive impacts on both bank performance and asset quality while board size  and boards' political connections have significantly negative impact.


Opinion and Commentary


Law in the Finance-Growth Nexus: The South Asian Paradox
Shalini Perera
The remarkable economic growth taking place among the economies of South Asia, despite poorly functioning legal systems and emerging financial systems, is paradoxical to the law-finance-growth nexus widely accepted by academics and international organisations. Perera explores the potential lessons from this experience.


China’s (Painful) Transition from Relation-Based to Rule-Based Governance: When and How, Not If and Why
Shaomin Li
Li investigates whether or not China will be able to transform from the  relation-based governance to a rule-based governance. Li argues from cost/benefit and social justice perspectives, China must indeed complete this transition. Moreover, he argues that cultural heritage is not the main obstacle to the transition, for the main obstacle is the powerful political forces that have been deeply entrenched in and benefited from the relation-based system. As a policy implication, he argues that Chinese government officials must realize the inevitability of this transition and the dire consequences of not completing it. Businesses must realize that the relation-based governance is in decline and must be prepared to embrace the rule-based governance.




Oekom Corporate Responsibility Review 2013
Oekom Research's report includes corporate ESG ratings, overall performance of sectors and countries, and it also touches upon the global challenges of sustainable development.


MSCI Emerging Markets ESG Indices
A short report on the methodology and historical performance of MSCI Emerging Market ESG Index. Read a recent study using MSCI indices.


Raising the Bar on Corporate Governance: A Study of Eight Stock Exchange Indices
A new report from IFC and the World Bank finds that Corporate Governance Indices (CGI) can raise a country’s overall corporate governance standards and can offer companies possible financial and investment benefits from corporate governance improvements.


Events and Calls for Papers


EMCGN is looking for interested parties to host the 5th International Conference on Corporate Governance in Emerging Markets. We would like to start the discussion on the host(s) for the 2015 conference during this year's conference in India. We kindly ask interested parties to prepare a short expression of interest proposal to be distributed to the participants on August 23, 2013. See detailed information.


2nd International OFEL Conference on Governance, Management and Entrepreneurship will be held on April 4-5, 2014 in Dubrovnik, Croatia. Abstract submission deadline is September 15, 2013.


CSR & Corporate Governance Conference will be help on September 19-20, 2013 at the Waseda University in Tokyo, Japan.


2013 ICGN Debate and Responsible Investor Program will be hosted by ICGN in partnership with the Institute of Directors in Southern Africa on October 3-4, 2013 in Cape Town, South Africa.  


Call for papers by 2nd International Conference on Management, Leadership and Governance includes the topic of corporate governance in emerging economies. The conference will be held on March 20-21, 2014 in Wellesley, MA, United States.


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

July 2013

The Emerging Markets Corporate Governance Research Network is supported by IFC's 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 Forum's activities and publications, visit its website For more information about the EMCGN's activities, go to or contact

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