کاهش خطر در بازارهای در حال ظهور: بهبود کیفیت کار حاکمیت شرکتی؟ Reducing risk in the emerging markets: Does enhancing corporate governance work?

Introduction A considerable body of literature supports the notion that the corporate governance environment(i.e., effective internal control systems and board oversight, reduction in risk taking behaviors, increase in firm value) in the US has improved since the passage of the Sarbanes—Oxley Act (SOX) in 2002 and the promulgation of US governance standards set by the Securities and Exchange Commission (SEC) in 2003 (Beasley et al., 2009; Chang and Sun, 2009; Chhaochharia and Grinstein, 2007; Cohen et al., 2008, 2010; Jain et al., 2008; Wang, 2010). Also, given audit committees’ strengthened role in monitoring the financial reporting process and heightened responsibility for reporting accuracy, firms have become more conservative during the SOX era (DeZoort et al., 2008). This is substantiated by research showing a reduction in the acquisition of risky investments as new governance rules are implemented (Bargeron et al., 2010; Cohen et al., 2007; Shadab, 2008). Few studies have examined the relationship between governance and risk behavior of firms operating in the emerging markets (Braga-Alves and Morey, 2012; Chang et al., 2015). It follows then that scant research has been dedicated to the governance — risk relation among crosslisted EM firms that are exposed to SEC regulations through the issuance of an American Depository Receipt (ADR) or non-cross-listed EM firms (Jayaraman et al., 1993; Litvak, 2007a, 2007b, 2008). Currently, the literature lacks an overarching theoretical model that depicts international corporate convergence in which firms commit to more rigorous regulatory and disclosure standards as a form of ‘‘bonding’’ in an effort to strengthen their governance while reducing their exposure to agency costs so that they may remain competitive both in local and global markets. To build our theoretical model, we employ four individual rules to determine if the riskiness of both cross-listed (ADRs) and non-cross-listed EM firms is affected by US best practices governance standards. Each of the rules are compulsory for firms listed on the NYSE or NASDAQ and identified in Section 303A of the New York Stock Exchange’s (NYSE) Listed Company Manual. Specifically, the four mandated rules employed are: the establishment of three independent committees (i.e., nomination, compensation and audit committees), independent directors, duality of the Chief Executive Officer (CEO) and the existence of a corporate ethics policy. The rules are employed to determine (1) if EM firms that adopt standards of corporate governance set in the US have the same impact on risk taking as US firms; and (2) if the effect of corporate governance on risk taking measures differs between cross-listed ADRs that are subject to US governance standards and non-cross listed EM firms that are not held to those standards.