Corporate Governance and Firm Performance in Ukraine

Vitaliy Zheka

No 605, CERT Discussion Papers from Centre for Economic Reform and Transformation, Heriot Watt University

Abstract: This study investigates the impact of overall level as well as of separate elements of corporate governance on enterprise performance for public companies in Ukraine. We use unique data on corporate governance choices for above 5 thousand firms (around a half of all public companies in Ukraine) for three years from 2000 to 2002. We construct index/sub-indices of corporate governance describing such aspects of corporate governance as shareholder rights, transparency/information disclosure, board independence, chairman independence and ownership arrangements. The novelty of our approach is that we use social trust factors as instruments for corporate governance choices. We use a set of instrumental variables coming mainly from "trust" literature, in particular political diversity, religion and ethnic diversity, and methods of privatisation, to tackle possible endogeneity. We employ ordinary least squares (OLS), two-stage least squares (2SLS), two-stage generalized method of moments (2SGMM), fixed effects (FE), random effects (RE), fixed effects instrumental variables analysis (FE IV) and random effects instrumental variable analysis (RE IV) to analyse the governance effects in the framework of standard production function approach. We find strong evidence that corporate governance predicts firm performance in the transition context. We do not find significant evidence of reverse causation or other endogenous effects. OLS results predict that one-point-increase in our overall corporate governance index would result in around a half-percent increase in performance; and worst to best change in our overall corporate governance index predicts about 40% increase in company's performance. We document statistically and economically strong effects of such governance elements as shareholder rights, transparency and board independence on performance. We also find a negative effect of the independence of the board chairman on performance.

Keywords: Ukraine; corporate governance; firms (search for similar items in EconPapers)
JEL-codes: G34 P2 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-cwa, nep-fin and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www2.hw.ac.uk/sml/downloads/cert/wpa/2006/dp0605.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hwe:certdp:0605

Access Statistics for this paper

More papers in CERT Discussion Papers from Centre for Economic Reform and Transformation, Heriot Watt University Contact information at EDIRC.
Bibliographic data for series maintained by Colin Miller ().