The important thing is not being afraid to take a chance. Remember, the greatest failure is to not try. Once you find something you love to do, be the best at doing it.

Debbi Fields, Author

When is enough good enough?

The combination of ineffective corporate governance at the company level and an uncertain legal and regulatory environment can significantly reduce the prices investors are willing to pay when investing in companies in emerging markets.

We report the findings of a survey that asks investment professionals to compare the value of a hypothetical Australian company with that of its identical counterparts located in five emerging markets: Europe, United Kingdom, Saudi Arabia, South Africa, and Asia. The counterparts vary on the level of investor protection and corporate governance only.

The responding investors said they would attribute a valuation discount to companies in emerging markets relative to the Australian company. The discounts ranged from a low of 13.5% for the Malaysian company to 51.2% for the Iranian company. Moreover, they indicated they would require costs of equity for these investments that were consistent with even larger valuation discounts.

The investors’ responses to the survey also suggest that corporate governance is especially important in countries with weaker investor protection. Well-governed companies located in these countries enjoy significant value premiums that can partly offset the negative effect of the poor institutional environments, which suggests there may be a significant payoff for investors that succeed in improving the governance of the companies they invest in.

Why most small business fail in the last year?

  • All emerging market economies should continue to reform their legal, regulatory, and institutional frameworks to foster the effectiveness and enforceability of corporate governance regimes.

  • Most emerging market economies should continue to bolster the rights of outside investors, in particular minority shareholders.
  • Bringing disclosure requirements fully in line with international best practice is needed in many emerging market economies. Promoting greater board independence is also likely to yield benefits.
  • Better corporate governance and investor protections are associated with stronger corporate balance sheets. These features are linked to lower short-term debt ratios, lower default probabilities, and the ability to borrow at longer maturities.
  • Many emerging market economies should bring disclosure requirements fully in line with best international practice.

I make a conscious effort to keep things in perspective when I get burned out. It is easy to get stuck in the daily grind, but if you think about all the distance you have covered, and what lies ahead, it is much easier to feel motivated and optimistic.

Alex Litoff, Event Farm

‘Investor Protection and Corporate Governance’ analyzes the impact of corporate governance on firm performance and valuation. Using unique datasets gathered at the firm-level–the first such data in the region–and results from a homogeneous corporate governance questionnaire, the book examines corporate governance characteristics, ownership structures, dividend policies, and performance measures. The book’s analysis reveals the very high levels of ownership and voting rights concentrations and monolithic governance structures in the largest samples of European companies

  • Market Outcomes
  • Protection Indicators
  • Cash Dividends to Cash Flow
  • Descriptive Statistics on All Variables
  • Control and Corporate Governance Variables

In a weak regulatory environment, firms need to adapt to overcome an institutional framework that leaves them at a disadvantage in terms of their ability to raise finance. Companies need to work more assiduously to attract capital by providing a better bundle of protective measures for their investors.

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