Implementation and Unanticipated Impact of Corporate Disclosure in an Emerging Economy: Evidence from Russia

68 Pages Posted: 9 Aug 2018 Last revised: 5 Jun 2019

See all articles by Suman Banerjee

Suman Banerjee

Stevens Institute of Technology; Stevens Institute of Technology

Saul Estrin

London School of Economics & Political Science (LSE); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Sarmistha Pal

University of Surrey; IZA Institute of Labor Economics

Date Written: May 21, 2019

Abstract

Do corporate governance reforms influence firm decision-making in the intended way in countries where the institutional framework is weak? We explore this issue for Russia, which implemented a corporate governance reform in 2002. Contrary perhaps to expectation, we document a significant increase in compliance to transparency and disclosure (T&D) rules over 2003-2007. The immediate effect of the new rules was to improve earnings quality as discretionary accruals fell. Market valuations however did not start improving until 2007 when all treated firms started disclosing quality information. The mechanism for the higher valuations was improved earnings quality and lower cost of capital, though cross-listed firms did not experience this. We find that treated domestic listed firms enjoyed about 10% increase in firm value, even when 100% compliance was not achieved. These findings establish that there is a benefit from increasing the requirements for disclosures, even in a country with weak institutions.

Keywords: Natural Experiment, 2002 Russian Corporate Governance Code, Earnings Management, Market Valuation, Difference-In-Difference Model, Domestic vs. Cross-Listed Firms, Russia

JEL Classification: G3, K2, O38

Suggested Citation

Banerjee, Suman and Estrin, Saul and Pal, Sarmistha, Implementation and Unanticipated Impact of Corporate Disclosure in an Emerging Economy: Evidence from Russia (May 21, 2019). Available at SSRN: https://ssrn.com/abstract=3218966 or http://dx.doi.org/10.2139/ssrn.3218966

Suman Banerjee

Stevens Institute of Technology ( email )

525 River Street
Hoboken, NJ 07030
United States
2012613689 (Phone)

Stevens Institute of Technology ( email )

Hoboken, NJ 07030
United States

Saul Estrin

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Sarmistha Pal (Contact Author)

University of Surrey ( email )

Stag Hill
Guildford, England GU2 7XH
United Kingdom
01483 683995 (Phone)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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