Does English and American-Style Corporate Governance Translate to Emerging Markets?

Global Corporate Governance Forum, IFC

CG Insights – top corporate governance experts discuss the latest research. Dr. Prabirjit Sarkar is head of the Economics Department at Jadavpur University in Kolkata and Visiting Fellow at the Centre for Business Research of the University of Cambridge in England. His primary research interest is the connection between national legal systems, corporate governance, and economic performance.

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

…A paper by Valentina Bruno and Stijn Claessens on the risks of over-regulating corporate governance. The paper suggests that too much of a good thing – in this case corporate governance regulations – can in fact turn out to be bad! There should be some basic system with a minimal amount of corporate governance regulations, but if there’s too much, the result will be counterproductive. This finding is particularly interesting in light of the other conclusion the authors make, which is that at the firm level, corporate governance plays an important role in efficient company monitoring and shareholder protection, with a positive impact on valuation. So to put it in simple terms, the takeaway is that when companies themselves take the lead in strengthening their own corporate governance, it can lead to benefits. But when too many regulations are imposed on them from the outside – by the country’s legislative body – this over-regulation can increase the potential for negative business impacts. Continue reading…

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