Corporate Governance Practices and Financial Structure in Emerging Markets: Evidence from Brick (K) Countries

Thursday, 2 July 2015: 8:30 AM-10:00 AM
CLM.7.03 (Clement House)
Guler Aras, Yildiz Technical University, Istanbul, Turkey
Emerging markets over the last decade have demonstrated their potential to become the core of the global economy, even though in recent months several questions arose about their robustness. The debate about corporate governance practices specifically in BRIC(K) countries have emerged as privatizations, opening of the economy and entrance of new investors which also have stimulated new efforts towards better corporate governance practices. For this purpose, the emerging economies require a detailed research of appropriate corporate governance mechanisms that best suit them, more so under the new concerns about them. This paper aims to investigate major emerging markets (BRIC(K) countries in terms of governance practices which differ in many ways including board structures, board procedures, disclosures, ownership structures and minority shareholder rights. Moreover; the paper aims to attempt these governance practices on financial structure in terms of financial profitability and financial leverage. This cross-country study contributes to the literature by examining the effectiveness of a restricted set of governance practices targeted by selected emerging markets in an effort to improve corporate governance practices in emerging markets. Findings provide support for the notion that board independency, women representation on board, duality and the number of board meetings are key factors in determining the corporate governance efficiency and play important roles in enhancing firm financial structure in BRIC(K)s firms. This paper also attempts to identify the main issue in corporate governance research which governance practices are universal or instead depend on country and firm characteristics. Furthermore, these multi-country results, together with the view of common and civil law differentiation, suggest that country characteristics strongly influence the aspects of governance practices while predicting firm financial structure