Corporate Governance and Investment-cash Flow Sensitivity: Evidence from Emerging Markets
Document Type
Article
Publication Date
6-2013
Department
College of Business
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.
Publication Title
Emerging Markets Review
Recommended Citation
Francis, B.,
Hasan, I.,
Song, L.,
&
Waisman, M.
(2013).
Corporate Governance and Investment-cash Flow Sensitivity: Evidence from Emerging Markets.
Emerging Markets Review,
15, 57-71.
http://doi.org/10.1016/j.ememar.2012.08.002
Retrieved from: https://digitalcommons.mtu.edu/michigantech-p/6329
Publisher's Statement
© 2012 Elsevier B.V.