| Summary: | This research is the result of the author’s quest to answer the question whether
Corporate Governance is effective in Emerging Markets. Literature on Corporate
Governance in the emerging markets of Latin America is limited mostly due to the
relatively slower development of capital markets and the late adoption of
corporate governance principles. Corporate Governance laws, which largely follow
Sarbanes Oxley guidelines, were published and implemented in the mid 00´s and
no research has checked their impact on corporate value in Latin America.
This research reports compromises two empirical projects. The first project
focused on the relationship between boards of directors attributes such size and
composition, Corporate Governance law and firm value for Colombia. The second
project focused on another Corporate Governance variable, CEO Duality and tested
whether it has had any impact in Mexico. This second project also studied whether
board attributes such as size and composition and Corporate Governance law were
related to firm value.
Based on the listed companies from Colombia and Mexico for the years 2001 to
2012 the author found no relationship between board size or composition and firm
value. Results from Mexico, where CEO duality is allowed showed that it has no
relationship with firm value. These results do not support or contradict either
Agency theory or stewardship theory. Results on the impact of the adoption of a
Corporate Governance law in firm value are mixed. Results for Colombia contradict
previous literature by reporting a positive relationship between Corporate
Governance laws and firm results while results from Mexico support previous
research by reporting no relationship between these variables.
This research is valuable for regulators and policy makers in their quest to assess
the impact of the adoption of Corporate Governance laws in emerging markets. .
Since effective Corporate Governance is important in easier access to financing it is
important for shareholders to know which Corporate Governance mechanisms are
positively related to firm value. Similarly, it is also important for investors (both
foreign and local) in assessing the risk for equity investments in Colombia and
Mexico.
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