In addition to our usual references to new research papers, reports, and events, we would like to draw your attention to the forthcoming international conference (http://www.igidr.ac.in/iccgem2013) organized by our network, with a note from our Chair:
“I am already very much looking forward to attend the 4th International Conference on Corporate Governance in Emerging Markets to be held in Hyderabad, India. As in the three events before, the program committee has succeeded in partnering with a well recognized local institution to provide for excellent facilities in an exciting location with plenty to explore for other interests. I am particularly pleased that we have secured the two keynote speakers: C.V. Starr Professor of Economics Viral V. Acharya of Stern Business School and Steve Lydenberg from Domini Social Investments LLC. Both of them are well recognized experts on corporate governance. I think this combination will prove to attract a very good set of papers and I am looking forward to your submissions.”
Stijn Claessens, International Monetary Fund and University of Amsterdam
CG Insights Series: Understanding Cultural and Social Forces is Crucial to Improving Corporate Governance
Bruce Kogut is the Bernstein Professor of Ethics and Leadership at Columbia Business School and directs the Sanford C. Bernstein Center there.
This is an abbreviated version, read the full interview here.
The most interesting piece on corporate governance I read recently was…
… David Roodman's book, Due Diligence: An Impertinent Inquiry into Microfinance. In this book, Roodman offers an insightful analysis of the problems in peer governance and monitoring, some of which may contribute to the mixed delivery on the promises of microfinance.
Right now, I am working on…
… A follow up to The Small Worlds of Governance, an MIT press book I co-authored along with 20 colleagues. The argument is quite simple: governance is exercised through powerful clubs that constitute the social and business networks among owners, directors, and managers. These connections in networks act as societal pulls on boards and executive decision makers. The new work analyzes statistics on 50 million companies around the world and their progression towards increased global integration over a period of years.
I think the most relevant CG research topic for emerging markets now is…
…understanding more about the dynamics of cultural and social connections and interactions within and between unique country contexts in the effort to improve corporate governance. The research suggests that laws and regulations alone are not sufficient to promote good governance—you have to account for the underlying sociology at play.
Similarly, you can see social forces at play in…
…the ballooning of executive pay packages in the last 15 years. It is becoming clear that compensation packages for senior leadership are not determined solely on the basis of supply and demand. Simply put: how much their peers get paid matters a lot to executives.
The bottom line here is that sociology matters. You can’t just write a governance rule and expect an outcome—you have to take into account societal norms as well as the network structures to the informal social connections, interactions, and relationships. The good news is that we have a better understanding today of how to account for these issues in an analytical way.
Research
Does Corporate Governance Determine Corporate Performance and Dividends during Financial Crisis: Evidence from Poland
Oskar Kowalewski
The author constructs a Corporate Governance Index (CGI) for 298 non-financial companies listed on the Warsaw Stock Exchange between 2006 and 2010. He finds a positive association between corporate governance and performance, and he also finds that higher corporate governance leads to an increase in cash dividends. Nonetheless, even though better-governed Polish firms had higher return on assets during the crisis, the evidence shows that they paid less dividends compared to firms with lower corporate governance standards.
Client Importance and Auditor Independence: the Effect of Asian Financial Crisis
Gaoguang Zhou, Xindong Zhu
The authors cover the financial markets in Hong Kong, Indonesia, Malaysia, Taiwan, Thailand, and Singapore between years 1994 and 2001. In line with the crash-then-law hypothesis (Coffee 2001) they find that auditors are less likely to compromise their independence for important clients after the crisis. Furthermore, the effect of financial crisis on auditor independence is more pronounced in weaker investor protection regimes. The authors also point out the ways in which their findings can be linked to the current financial crisis.
Internet-Based Corporate Disclosure and Market Value: Evidence from Latin America
Urbi Garay, Maximiliano González, Alexander Guzmán, and María Andrea Trujillo
This paper focuses on the seven largest Latin American economies: Argentina, Brazil, Colombia, Chile, Mexico, and Peru. The evidence shows that internet-based corporate disclosure has a significantly positive impact on Tobin’s Q and returns on assets (ROA). More specifically, 1% increase in the Internet-Based Corporate Disclosure Index causes a 0.16% increase in Tobin’s Q and 0.01% increase in ROA. The authors advise firms to further improve their corporate disclosure practices, and argue that national corporate governance systems should pay more attention to internet disclosure and even enforce some level of internet disclosure.
The Relationship between Disclosure, Information Timeliness and Corporate Governance: A Cross Country Study
Wendy Beekes, Philip Brown, Wenwen Zhan and Qiyu Zhang
The authors investigate whether better-governed firms are associated with greater disclosure and more timely price discovery. They show that better-governed firms make more announcements to the market and better governance is associated with less timely reflection of a firm’s performance information in share prices. This implies corporate governance is a substitute rather than a complement to corporate transparency. Therefore, more disclosure by better governed firms will not necessarily be reflected in share prices in a more timely fashion.
Opinion and Commentary
Investing in Good Governance
Lucian A. Bebchuk
In a recent newspaper article Lucian Bebchuk summarizes findings on the correlation between governance and returns. He explains how the correlation between governance and stock returns in the 1990s did not persist in later years, because markets learned to distinguish between good-governance and poor-governance firms (as defined by the governance indexes) and to price the difference into stock values.
Corporate Governance Disclosure in South Africa: Theory versus Practice
Nadia Mans-Kemp, Pierre Erasmus, and Suzette Viviers
Despite previous findings on South African environmental, social and corporate governance (ESG) performance, and rapid regulatory, voluntary and market-based code developments in South Africa, corporate governance reporting of some South African firms are still found to be relatively weak. For future research the authors recommend developing a more comprehensive ESG research tool.
Five Questions about SRI – Weekly Expert Interview
Emerging Markets ESG had a recent interview with Mike Davies, Director of Kigoda Consulting in South Africa. Mike Davis answers questions about socially responsible investment and ESG practices in Africa, and he also comments on asset classes that are most promising for SRI in Africa in the following years.
Embrace the Coming Changes in Corporate Governance: Lessons from Developments in Corporate Law – A Comparative View
Ivan Tchotourian
Tchotourian aims to reflect on the legitimacy of agency theory and on how to build corporate governance differently. Touching upon and comparing various legislation around the globe he investigates a new conceptualization of corporate governance. He explains how policy makers will be forced to re-think corporate governance towards “responsible corporate governance” and shareholder-centrism approach will fade away.
Reports
CG Watch 2012: Market Rankings
Corporate Governance Association (ACGA)
The sixth and latest biannual survey of the Asian Corporate Governance Association (ACGA) summarizes the changes and reforms in corporate governance practices in Asia. Seven Asian countries improved their governance rankings over the last two years. Singapore, Thailand, Malaysia, India, and the Philippines are among those countries that are ranked higher compared to their earlier rankings in 2010. Japan, Taiwan and China now have lower rankings compared to 2010.
Investor Relations Online in Ukraine
Concorde Capital
Concorde Capital released their latest survey on corporate governance-related topics in Ukraine. This survey is on the investor-friendliness of the websites of 100 leading Ukrainian companies, including all those listed on foreign stock exchanges and with Eurobonds. The results indicate that Ukrainian websites are more oriented toward customers than investors, and websites of companies with foreign securities (listed on a foreign stock exchange or Eurobonds) are better for investors than those of the local issuers.
Increasing Need to Enhance and Harmonise Disclosure Requirements in the Islamic Capital Market
International Organisation of Securities Commissions
The Islamic Financial Services Board, International Organisation of Securities Commissions, and Securities Commission Malaysia formed a roundtable to discuss the development of international regulatory standards and best practices relating to disclosure requirements for Islamic Capital Market products. Attached is a press release regarding disclosure requirements in the Islamic capital market.
Events and Calls for Papers
Call For Papers: European Accounting Review Special Section - The Influence of Political Forces on Financial Reporting and Capital Market Activity. The deadline for submission is October 31, 2012.
Entries are now open for ICFR - FT Research Prize 2012 / 2013. The theme is “International financial supervisory convergence: how much should there be? How best to assess the appropriate level of cross border supervision and enforcement?” The deadline for submissions is November 12, 2012, and the overall winner will be awarded US $7,500.
International Conference on Corporate Governance and Business Management will be held in Paris on November 28-29, 2012.
International Corporate Governance Network (ICGN) will host an Oxford-style dinner debate on December 3, 2012 in Rotterdam, Netherlands. The discussion will be on whether companies that do not report on material ESG factors are less attractive to institutional investors or not.
Fourth Joint BIS/ECB/World Bank Public Investors Conference will take place at the World Bank, Washington DC, on December 3-4, 2012.
Harvard Business School in collaboration with the Journal of Accounting & Economics is organizing Conference on Research in Corporate Accountability Reporting. The conference will be held at Harvard Business School, on January 18, 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.” The conference will be held on April 25-26, 2013 at the Schulich School of Business, York University, Canada.
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 Ihsan Canayaz at ihsancanayaz@sabanciuniv.edu
Thank you,
Melsa Ararat
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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 http://www.gcgf.org/research or contact melsaararat@sabanciuniv.edu.