Over the past two decades, the relationship between corporate governance and firm performance has received considerable attention from inside and outside academia. Most cross-country studies on corporate governance focus on the relationships between economic performance and countries’ different legal systems, particularly the level of investor protections.
On a different track, researchers have investigated how different firm structures determine corporate governance and the effect of those firm-level governance choices on firm performance. These studies, largely based on data from developed countries with dispersed ownership, assess several governance indicators that could be associated with higher valuation and better performance.
However, country-specific research on emerging markets has delivered mixed results, suggesting that empirical evidence on the relationship between corporate governance indicators and firm performance in emerging markets is inconclusive. Governance arrangements that are optimal for investor protection in one country could be suboptimal for companies in another. For example, the level of ownership concentration at which owners are more likely to expropriate minority shareholders changes from country to country, depending on the regulations and the level of enforcement. Further, in some circumstances, “friendly” outside directors may also be more trusted and more knowledgeable than “independent” directors.
For the past three years, approximately 1,000–1,200 papers have been published each year on the Social Sciences Research Network with the term “corporate governance” appearing as a key word in the abstract. However, fewer than 1 percent of these papers focus on emerging markets. These numbers indicate a relatively limited scholarly focus on emerging markets, possibly due to data limitations. Much of the work thus far has focused on board structures, for which data are relatively more available.
Whatever the underlying reasons, we are left with comparatively little specific scientific research to guide companies or investors in emerging markets—which is why the Global Corporate Governance Forum has supported the Emerging Markets Corporate Governance Research Network. This network informs the Forum and its partners, among others, about the most recent literature on corporate governance and development. It also identifies priorities for future research in the Forum’s areas of activity, generates and publishes discussion papers and research working papers, and promotes a research strategy that supports academic research capacity in developing countries on corporate governance.