Corporate governance and investment-cash flow sensitivity: Evidence from emerging markets

Bill Francis, Iftekhar Hasan, Liang Song and Maya Waisman

Emerging Markets Review, 2013, vol. 15, issue C, 57-71

Abstract: Controlling for country-level governance, we investigate how firms' corporate governance influences financing constraints. Using firm-level corporate governance rankings across 14 emerging markets, we find that better corporate governance lowers the dependence of emerging market firms on internally generated cash flows, and reduces financing constraints that would otherwise distort efficient allocation of investment and destroy firm value. Additionally and more importantly, firm-level corporate governance matters more significantly in countries with weaker country-level governance. This suggests substitutability between firm-specific and country-level governance in determining a firm's investment sensitivity to internal cash flows.

Keywords: Corporate governance; Emerging markets; Investment–cash flow sensitivity (search for similar items in EconPapers)
JEL-codes: G20 G30 G31 G38 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:15:y:2013:i:c:p:57-71

DOI: 10.1016/j.ememar.2012.08.002

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