Report on The First 10 Years of the Emerging Markets Corporate Governance Research Network (EMCGN) Melsa Ararat, Stijn Claessens, and B. Burcin Yurtoglu About IFC Corporate Governance Group The Group brings together staff from investment support and advisory operations into a single, global team. This unified team advises on all aspects of corporate governance and offers targeted client services in areas such as increasing board effectiveness, improving the control environment, and family businesses governance. The Group also helps support corporate governance improvements and reform efforts in emerging markets and developing countries, while leveraging and integrating knowledge tools, expertise, and networks at the global and regional levels. ©Copyright 2014. All rights reserved. International Finance Corporation 2121 Pennsylvania Avenue, NW, Washington, DC 20433 The conclusions and judgments contained in this report should not be attributed to, and do not necessarily represent the views of, IFC or its Board of Directors or the World Bank or its Executive Directors, or the countries they represent. IFC and the World Bank do not guarantee the accuracy of the data in this publication and accept no responsibility for any consequences of their use. The material in this work is protected by copyright. Copying and/or transmitting portions or all of this work may be a violation of applicable law. The International Finance Corporation encourages dissemination of its work and hereby grants permission to users of this work to copy portions for their personal, noncommercial use, without any right to resell, redistribute, or create derivative works there from. Any other copying or use of this work requires the express written permission of the International Finance Corporation. For permission to photocopy or reprint, please send a request with complete information to: The International Finance Corporation c/o the World Bank Permissions Desk Office of the Publisher 1818 H Street, NW Washington, DC 20433 All queries on rights and licenses, including subsidiary rights, should be addressed to: The International Finance Corporation c/o the Office of the Publisher World Bank 1818 H Street, NW Washington, DC 20433 Fax: (202) 522-2422 Report on the First 10 Years of the Emerging Markets Corporate Governance Research Network (EMCGN) by Melsa Ararat,1 Stijn Claessens,2 and B. Burcin Yurtoglu3* Contents 1. Introduction: EMCGN’s Purpose and History...................................................................................... 5 2. Network Objectives, Activities, and Output....................................................................................... 7 Objectives of CG Research in Emerging Markets........................................................................................ 7 Network Activities..................................................................................................................................... 7 New Research........................................................................................................................................... 8 3. Contributions to Research and Policy................................................................................................ 10 Research Focus....................................................................................................................................... 10 Quality and Impact of Research................................................................................................................11 Contributions to Policy Changes.............................................................................................................. 16 4. Overall Lessons.................................................................................................................................... 17 5. Conclusion............................................................................................................................................ 18 Melsa Ararat,1 Stijn Claessens,2 and Burcin Yurtoglu3* The views expressed do not necessarily represent those of the IMF, its board of directors, or its * management or IMF policy. 1 Sabanci University School of Management 2 IMF and University of Amsterdam 3 WHU Otto Beisheim School of Management 10-Year Report of the EMCGN 3 Executive Summary This paper provides an account of the Emerging Markets Corporate Governance Research Network (EMCGN) and its first 10 years of activities. The Network was established under the auspices of the Global Corporate Governance Forum (now incorporated into IFC’s Corporate Governance Group). The paper describes the history of the EMCGN and its objective (to stimulate research focused on corporate governance in emerging markets as well as transition and developing countries); its structure, which is a joint undertaking of corporate governance research centers and internationally recognized scholars, with IFC Corporate Governance acting as its catalyst; and its modalities: organizing workshops, holding biennial conferences, and disseminating and communicating research. The paper reviews the quantity and quality of EMCGN’s output, based on objective research rankings, and its effects on countries in capacity building and policy changes and development, based on the experiences of participants and policymakers exposed to its work. Analysis of publication data shows that EMCGN has been successful in encouraging research on corporate governance in emerging markets in most areas of research identified as critical at the Network’s inception and through its interactions with practitioners and policymakers. EMCGN also has been successful in stimulating collaborative research and facilitating dialogue between scholars and the larger corporate governance community. Its impact on policy and practice development, inherently difficult to pinpoint, seems to have been most effective when channeled through efforts of local corporate governance associations with professional members to influence relevant policymakers and when actively using media to communicate the need for key reforms. It concludes that EMCGN has been highly instrumental in delivering quality research, encouraging empirical cross-country investigations and collaborations, and fostering local research capacity building. Successfully informing and influencing policy at the country and global levels has required institutional endorsements, engagement with complementary institutions, continuity in leadership, and involvement of high-profile scientists. Also, success in fostering policy changes has varied, depending on resources available and the quality of communication. This review of EMCGN also provides lessons for other networks aimed at supporting research related to economic and social development in emerging markets and developing countries. Experience with research networks in emerging and developing countries is relatively new, and networks have met with mixed success. The case study of EMCGN shows that research networks in emerging markets can generate significant payoffs, provided that key success factors are in place and that barriers are recognized early on and addressed. The EMCGN has been instrumental in encouraging cross-country research, and its experiences make it clear that developing countries are different in many ways. The work of the EMCGN also reveals the need for more and better research and for better dissemination of the research on individual countries. It underscores a great need to share methodologies and, to the extent possible, make the lessons generally applicable. 4 10-Year Report of the EMCGN 1. Introduction: EMCGN’s Purpose and History The Emerging Markets Corporate Governance Network’s primary purpose is to stimulate research focused on corporate governance (CG) in emerging markets as well as transition and developing countries. The Network aims to raise the academic quality of CG-related research through fostering international exchanges among scholars in all regions, providing young and promising scholars with exposure to international experts, and exploring the common aspects of corporate governance issues across countries. EMCGN began on April 5, 2002. Its formation was in large part motivated by research showing the role of CG deficiencies leading to the East Asian financial crises in the late 1990s as well as the subsequent CG failures in other emerging markets and major advanced countries.4 Furthermore, pioneering studies then available demonstrated that CG greatly matters for firm performance and sustainability and for countries’ growth and development.5 Since then, findings of other studies have reinforced the essentiality of CG for development in many ways (for a comprehensive review, see Claessens and Yurtoglu 2012 and 2013). Several channels have been identified through which CG affects development, as shown in Figure 1. Figure 1: The Channels through which CG Affects Development Increased access to Can lead to greater investment, higher growth, and greater employment external financing by firms creation. Makes firms more attractive to investors, leading to growth and more Lower cost of capital employment. Better operational Through better allocation of resources and more effective management performance decision making. Important, as highlighted again recently, given the large economic and Financial crises less likely social costs of crises. Better relationships with Improves social and labor relationships and aspects such as environmental all stakeholders protection, and can help further reduce poverty and inequality. Source: Adapted from Claessens and Yurtoglu (2013). Acknowledging these channels and recognizing the crucial importance of countries’ institutional environment for fostering “good” CG, the Network supports the communication of researchers with policymakers and the private sector to share the outcomes of research and their implications for policy development. This interaction also gives researchers a better understanding of real-world challenges, which helps them identify knowledge gaps and align research agendas accordingly. Furthermore, while substantial reforms have taken 4 See Claessens and Fan (2001) for a review of the role of CG in East Asian financial crises (2002).  ome key references from that period include Shleifer and Vishny (1997) and LLSV (1998). Also, La Porta, Lopez-de-Silanes, and 5S Shleifer (2008 and 2013) provide an overview of this research. 10-Year Report of the EMCGN 5 place in many developing countries, the outcomes of these reforms have not yet been systematically captured by academic research. These outcomes are most efficiently captured by building global links, encouraging research collaboration, and facilitating outreach. From the start, EMCGN was conceptualized as a joint undertaking of CG research centers and internationally recognized scholars, with the Global Corporate Governance Forum (GCGF) acting as catalyst.6 (The Forum was later merged into IFC’s Corporate Governance Group, which continues to support the Network’s activities). The kick- off meeting at the World Bank in 2002 was attended by 50 participants, including leading researchers on CG, selected policymakers, practitioners, and staff from international institutions. The Network was formally launched in February 2004 in Tokyo by Stijn Claessens, then professor at the University of Amsterdam, and Florencio Lopez-de- Silanes, then professor at Yale University.7 Over the years, the Network has evolved. While it still works with IFC and builds on the EMCGN chair Stijn Claessens presents at the Fourth International Conference on Corporate Governance in Emerging Markets, Hyderabad, India, August 23–24, 2013. work undertaken by leading scholars in developed countries (many are its members), institutional capacity and research conducted in emerging markets on CG has increased substantially over the past decade. A number of regional and national CG research networks and centers have emerged, most often associated with premier developing/emerging country universities, boosting local research and policymaking capacity. AICG (Asian Institute of Corporate Governance)8 is the best example of this in Asia, and IBGC (Brazil Institute of Corporate Governance)9 is a good example in Latin America. These days, CG research in emerging markets is increasingly conducted by researchers associated with these regional and national centers, even when the researchers themselves are not based there. 6 The Global Corporate Governance Forum was an IFC multi-donor trust fund facility, co-founded by the World Bank and the Organisation for Economic Co-operation and Development (OECD) in 1999. The Forum promoted sustainable economic growth and poverty reduction within the framework of agreed international development targets. 7 In summer of 2005, Erik Berglof, then professor at Stockholm School of Economics, and Luigi Zingales, professor at University of Chicago, took over the co-chairmanship. The Network activities were stalled for a short period until 2007 when Claessens reassumed the role of the chair and a secretariat was established at Sabanci University Corporate Governance Forum. 8 Website: http://www.aicg.org/. 9 Website: http://www.ibgc.org.br/English.aspx. 6 10-Year Report of the EMCGN Parallel to this development, the debate on what constitutes good CG outside developed markets has intensified. Notably, increasingly research by these centers and elsewhere has shown that models applicable to developed countries do not always readily translate from advanced to emerging markets and have to be adapted. More generally, research has demonstrated the need to revisit and adapt what constitutes good CG. And the work of these centers demonstrates that a dialogue at the country or regional level between researchers and practitioners are valued by both parties, as it can foster the right forms of adaption and adjustments. 10-Year Report of the EMCGN 7 2. Network Objectives, Activities, and Output Objectives of CG Research in Emerging Markets The first meeting of the EMCGN in 2002 articulated the challenges for CG research in emerging markets as follows: “. . .[E]vidence on the importance and impact of CG is still fragmented and not always in a form to support policy recommendations. Especially in developing countries, the full relationships between CG, financing and development has yet to be clearly articulated and tested. Ownership structures, and legal and economic environments in developing and emerging markets still pose challenges to reform, and the implications for effective strategies are not fully understood. While researchers are tackling some of these issues, there is limited synergy "The conference and the meetings were a good between efforts in terms of data collection, opportunity to further my research with more exchange of ideas and development of a broad confidence. I am grateful to all who have made it research agenda that tackles the most urgent work! The Network and the conferences helped our issues from a policy perspective in developing and school and our scholars to expand their exposure to emerging markets.” (Claessens 2002) international cooperation and widen its activities." Kyung Suh Park The meeting highlighted lack of data as the key obstacle Korea University Business School for future research work and grouped data issues into the (Presenter, member of the following themes: 1) data on institutional frameworks, 2) Third Conference's Organizing Committee) firm data, and 3) data on CG choices by firms. Discussions also covered the need for new empirical research to address important methodological issues, including the simultaneity and endogeneity that impede inferences about causality from correlations and new structural models at the micro and macro levels. Key areas of research identified included 1) the evolution of countries’ institutional frameworks, 2) insider (family) ownership and control, 3) the role of first-stage financing and debt financing on CG, 4) the role of different types of owners and other stakeholders on CG, including banks, institutional investors, and employees, and 5) alternative mechanisms of CG such as changes in ownership structures and competition in factor markets. Network Activities The Network activities over the past decade have concentrated on organizing workshops and biennial conferences and on the dissemination and communication of research. EMCGN’s Workshop and Conferences In the first few years, the Network organized several regional workshops with participation by researchers from the regions: Chile in December 2002, South Africa in January 2003, Korea in May 2003, Hungary in July 2003, India in December 2003, Turkey in May 2004, and Shanghai in March 2005. The International Conference Series on Corporate Governance in Emerging Markets has become a key activity for the Network. Now the top global academic conference dedicated to corporate governance, it provides a venue for identifying the prevailing issues in CG and drawing broad lessons of CG in developing countries. The conferences typically involve policymakers and practitioners in special sessions, and can include a separate day for local market participants and investors’ community. The keynote speakers are carefully selected from among internationally acknowledged scholars and reflective practitioners. 8 10-Year Report of the EMCGN The First International Conference on Corporate Governance in Emerging Markets, held November 16–19, 2007, in Istanbul, involved more than 100 researchers from 30 countries. The conference took stock of ongoing research on CG in emerging markets and the expanding research in developing countries. More than 40 academic papers, including those specifically focused on Turkey, were presented and discussed, and two keynote speeches were delivered. It attracted researchers from all key emerging markets and brought them together with internationally acknowledged senior researchers in the Network and GCGF’s Private Sector Advisory Group (PSAG) members as reflective practitioners. This broad-range participation led scholars and practitioners to engage in a lively debate on the board’s role in CG, which also led to a publication on the topic.10 The Second Conference on Corporate Governance in Emerging Markets, held in São Paulo, Brazil, July 2–3, 2009, was a similar success. In September 2008, between the first two conferences, Yale University’s Millstein Center for Corporate Governance and Performance hosted a workshop that included presentations on a number of Network-supported research projects. The third conference took place in Seoul, Korea, June 28–29, 2011, and the fourth in Hyderabad, India, August 23–24, 2013. Preparations for the fifth conference, planned for Cape Town, South Africa, were under way at the time this paper was written. Dissemination A key task for any network is dissemination of activities, new research, and publications. The EMCGN research newsletter, electronically distributed by IFC to more than 1,000 addresses around the world, is the main vehicle for informing the CG community about state-of-the-art CG research in emerging markets. This information is also featured prominently in IFC’s Corporate Governance Network Bulletin, distributed to more than 8,000 practitioners in emerging markets, thus enhancing the dialogue of researchers with policymakers and the private sector. EMCGN, with the support of and in collaboration with IFC, published 14 quarterly newsletters from 2011 to March 2014. Each newsletter features an interview with a well-known scholar within the Network. The interviews effectively communicate the most recent thinking in CG through the words of interviewees. IFC also hosts and manages the EMCGN webpage,11 which serves as a knowledge repository and is the institutional backbone of the Network. It provides links to the conference websites and newsletters, facilitates downloading of publications, and features a calendar of Network events. Conference websites also provide video recordings of keynote speeches as well as panels that feature interaction between scholars and practitioners. New Research The Network is not envisioned to commission research, given the understanding that scholars themselves need to ensure academic quality and independence, and that other forms of peer review must oversee any research. From time to time, however, the Network organizes workshops where a smaller number of senior, international researchers can interact with a small group of researchers based in emerging markets. For a workshop at Yale University, for example, the scientific committee selected eight research projects from an initial list of 63 proposals in May 2007, and the chosen projects received a small grant to cover data collection. Researchers from eight countries presented their work in September 2008 at Yale’s Millstein Center for Corporate Governance and Performance. The Network also had commissioned a review of the empirical literature on CG in emerging markets to serve as background information for the workshop as well as to highlight future areas of research that should be particularly encouraged to address research gaps. (An updated version of this review is the EMCGN’s most popular resource, based on the number of downloads from the IFC website.) 10 See Ararat and Dallas (2010). 11 See the webpage at: http://bit.ly/1pgx45W. 10-Year Report of the EMCGN 9 One other way for scholars to support the mission of IFC, the Network’s main sponsor, is to contribute to its publications. Many members of the Network have authored articles and reports, which are disseminated to the IFC Corporate Governance Group’s global network of policymakers and practitioners. Table 1 provides a list of such publications. Table 1: IFC Publications by EMCGN Members as of December 31, 2013 Authors Year Title GCGF Publication Stijn Claessens 2012 Corporate Governance and Development, an Update Focus 10 B.Burcin Yurtoglu Corporate Governance in Emerging Markets: Melsa Ararat 2011 Why It Matters to Investors — and What They Can PSO 22 George Dallas Do About It Melsa Ararat Novo Mercado and Its Followers: Case Studies in 2008 Focus 5 B.Burcin Yurtoglu Corporate Governance Reform Ira Millstein Shri G.N. Bajpai Enforcement and Corporate Governance: 2003 Focus 3 Erik Berglof Three Views Stijn Claessens Eric Berglof 2003 Enforcement and Corporate Governance Discussion Paper 5 Stijn Claessens Florencio Lopez-de-Silanes 2003 A Survey of Securities Laws and Enforcement Discussion Paper 4 Ross Levine 2003 The Corporate Governance of Banks Discussion Paper 3 Enrico Perotti 2003 State Ownership: A Residual Role Discussion Paper 2 Randall Morck 2003 Corporate Governance and Family Control Discussion Paper 1 10 10-Year Report of the EMCGN 3. Contributions to Research and Policy Research Focus Consistent with the channels by which CG is thought to affect development and with the key topics in CG in emerging markets identified during the first and subsequent meetings, research has largely focused on a select group of issues. These include dynamics of ownership and control structures; the role of family- controlled firms, with special focus on the governance of business-group firms; the role of the board of directors; the role of institutional investors; and the effects of institutional environment, capital market regulations, and related legal issues. These are common topics that researchers have explored in all biennial conferences and are recurring themes in all work. Table 2 provides an overview of the specific issues of each conference. Table 2: Conference Themes Represented Number of Countries Conferences Key Notes Conference Call Themes Session Themes Istanbul Mark Roe: Political Instability 1.  Political power and corporate control in 1.  n.a. 30 Conference and Financial Development emerging markets (2007) Randall Morck: The Mystery of 2.  Relationship between financial sector 2.  the Great Pyramids development and corporate governance Determinants of board compositions 3.  and the role of the board in emerging markets and implications for corporate performance  he role of stakeholders in emerging 4. T markets and sustainable development Corporate governance and enforcement 5.  mechanisms in emerging markets Sao Paolo Randall Morck: Corporatism 1.  Dynamic aspects of ownership and 1.  Corporate Governance and Value 1.  19 Conference and the Ghost of the Third control structures Creation (2009) Way Inside the emerging-markets companies 2.  Foreign Listings 2.  Vikramaditya Khanna: 2.  The role of external and voluntary 3.  Stakeholders and Cultural Values 3.  Corporate Governance in mechanisms of governance India: Past, Present, and Future Institutional Shareholders 4.  The role of stakeholders in emerging 4.  Issues of Control 5.  markets and sustainable development Corporate Control 6.  Corporate governance and enforcement 5.  mechanisms in emerging markets Ownership and Control 7.  Seoul Bernard Black: Causal 1.  Dynamic aspects and effects of 1.  Agency Problem and Managerial 1.  18 Conference Inference Strategies in ownership and control structures in Incentive (2011) Corporate Governance emerging-market corporations Capital Markets and Corporate 2.  Research Political economy and institutional 2.  Governance Joseph Fan: Corporate 2.  aspects of corporate governance in CEO and the Board of Directors 3.  Governance in Emerging emerging economies Markets: Lessons from China Corporate Governance Mechanisms 4.  Corporate social responsibility, the 3.  and Corporate Decisions and Brazil role of stakeholders and sustainable development 5. Family-Controlled Firms Green Financing and CSR 6.  7. Institutions and Corporate Governance Shareholder Rights and Corporate 8.  Control Market for Control 9.  Governance of Business Groups 10.  10-Year Report of the EMCGN 11 Table 2: Conference Themes (continued) Represented Number of Countries Conferences Key Notes Conference Call Themes Session Themes Hyderabad Viral Acharya: Private Firms, 1.  Dynamic aspects of ownership and 1.  Corporate Governance and Disclosure 1.  22 Conference Public Firms, and the Financing control structures Debt and Corporate Governance 2.  (2013) of Innovation New dimensions of firm-society 2.  Management Behavior and Dominant 3.  Steve Lydenberg: Emerging 2.  interactions and governance implications Shareholders Trends in CSR data and Public and private enforcement and 3.  Disclosure Managerial Labor Market 4.  dynamic changes 3.  Vladimir Atasanov: Shock- Debt, Equity, and Corporate Governance 5.  Based Causal Inference in Board of Directors 6.  Corporate Finance Research L aw and Enforcement 7.  E xternal Monitoring 8.  Quality and Impact of Research Evaluation of research quality used to be somewhat subjective, but more recently the quality of research produced can be assessed objectively by publication performance of accepted papers (Arnold et al. 2003; Currie and Pandher 2011). There is also some indication that rankings of scholars are used in tenure decisions (Glover et al. 2006). Table 3 shows the publication records of accepted papers in the four global conferences organized by the Network. Table 3: Number of Accepted and Published Papers Number of Number of Number of Conference Year Submitted Papers Accepted Papers* Published Papers** Istanbul 2007 108 30 23 Sao Paulo 2009 138 28 15 Seoul 2011 107 38 12 Hyderabad 2013 133 27 1 *Total number of papers accepted for presentation in the four EMCGN conferences. **As of December 31, 2013. Of the papers presented at the four conferences, 103 were empirical and only a small fraction (9) theoretical. Of the 103 empirical papers, 72 focused on a single country and 31 of them were multi-country corporate governance studies. With the exception of a handful of papers that analyzed developed countries (three on the United States and one each on Sweden and Australia), all empirical papers have focused on one or more emerging markets. Table 4 classifies the papers presented in the four EMCGN conferences according to their broad orientation (theory papers versus empirical papers). It also documents the number of multi-country empirical papers and single-country empirical papers. 12 10-Year Report of the EMCGN Table 4: Topics Istanbul Sao Paulo Seoul Hyderabad Total Theory Papers 5 1 2 1 9 Empirical Papers 23 24 33 26 106 Empirical: Multi-Country Studies 6 9 10 6 31 Empirical: Single-Country Studies 17 15 23 20 75 Australia 0 0 0 1 1 Bangladesh 0 0 0 1 1 Brazil 2 6 0 1 9 Bulgaria 1 0 0 0 1 China/Hong Kong 6 2 6 5 19 India 2 0 3 6 11 Iraq 0 0 1 0 1 Israel 0 0 1 0 1 Korea, Rep. 4 3 5 3 15 Malaysia 0 0 0 1 1 Pakistan 1 0 1 0 2 Poland 1 0 0 0 1 Russia 0 1 1 0 2 Sweden 0 1 0 0 1 Taiwan, China 0 0 1 0 1 Thailand 0 1 0 0 1 Turkey 0 0 2 1 3 United States 0 1 1 1 3 Ukraine 1 0 1 0 2 Total 28 25 35 27 115 10-Year Report of the EMCGN 13 The top outlet for the conference papers is Journal of Corporate Finance, followed by Review of Financial Studies, Journal of Financial Economics, Corporate Governance, Journal of Financial Intermediation, and Pacific-Basin Finance Journal. Table 5 presents the positive trend in the quality of the journals that publish the conference papers. These are the top-tier journals in finance and have the highest impact factors in the field. They also fare disproportionately well on other factors, such as awareness and importance (Currie and Pandher 2011). According to Table 5, 73 percent of the papers of the first conference are already published and only 27 percent are working papers, whereas the same proportions are 54 percent and 36 percent for the second conference and 32 percent and 66 percent for the third conference. Table 5: List of Journals where Conference Papers are Published Hyderabad Immediacy Sao Paulo Index*** Factor** Istanbul Factor* Journal Title Impact Impact 5-Year Seoul Total Accounting Review 1 1 2.32 3.2 0.6 Asia Pacific Journal of Financial Studies 2 2 0.42 0.35 0.1 China Accounting and Finance Review 1 1 Chinese Business Review 1 1 Comparative Economic Studies 1 1 Corporate Governance 1 2 3 1.4 1.58 0.16 Emerging Markets Review 1 1 2 1.17 0.36 India Macroeconomics Annual 2008 1 1 International Journal of Business Governance 1 1 and Ethics Journal of Accounting and Economics 1 1 3.91 4.02 0.29 Journal of Banking & Finance 1 1 1.29 1.72 0.21 Journal of Business Research 1 1 1.48 2.2 0.22 Journal of Business Venturing 1 1 2.98 3.95 0.39 Journal of Comparative Economics 1 1 2 0.66 1.55 0.38 Journal of Corporate Finance 2 1 2 5 1.03 1.77 0.16 Journal of Economic Literature 1 1 6.67 10.16 1.08 Journal of Empirical Finance 1 1 0.93 0.12 Journal of Empirical Legal Studies 1 1 1.07 0.14 Journal of Financial Economics 2 1 3 3.42 5.09 0.67 Journal of Financial Intermediation 2 1 3 2.21 2.46 0.11 Journal of Financial and Quantitative Analysis 1 1 1.64 2.13 0.21 Journal of International Economics 1 1 2.09 3.27 0.37 Northwestern Journal of International Law 1 1 Pacific-Basin Finance Journal 1 1 1 3 0.57 0.07 Post-Communist Economies 1 1 0.49 0.5 0.03 Review of Accounting Studies 1 1 1.36 1.9 0.22 Review of Finance 1 1 2 1.44 0.36 Review of Financial Studies 2 1 3 3.26 5.37 0.42 Risk Governance and Control: Financial 1 1 Markets & Institutions 14 10-Year Report of the EMCGN Table 5: List of Journals (continued) Hyderabad Immediacy Sao Paulo Index*** Factor** Istanbul Factor* Journal Title Impact Impact 5-Year Seoul Total Strategic Management Journal 1 1 3.37 6.39 0.4 Studies in Economics and Econometrics 1 1 University of Illinois Law Review 1 1 0.81 0.84 0.66 Published 23 15 12 1 51 Working Paper (as of November 2013) 7 10 25 26 68 Paper does not exist with 3 1 4 its conference title Total 30 28 38 27 123 *The impact factor is a measure of the frequency with which the “average article” in a journal has been cited during a particular year or period and is calculated by dividing the number of current-year citations by the source items published in that journal during the previous two years. **The 5-year impact factor is the average number of times articles from the journal published in the past five years have been cited in the given Journal Citation Report (JCR) year. It is calculated by dividing the number of citations in the JCR year by the total number of articles published in the five previous years. ***The immediacy index is calculated based on the papers published in a journal in a single calendar year to measure how topical and urgent work published in a journal is. Another measure of the quality and impact of EMCGN’s work is the number of times the papers are downloaded and cited. Table 6 shows an increase in the average number of downloads over the years. For example, the average number of downloads of papers presented in the first conference is 103 per year per paper, whereas the same figure is 128 for the third conference. However, it is more difficult to gauge the improvement in citations, because papers are cited more, as they get older. For example, the average citation of papers presented in the first conference is 1.8 per year over a period of seven years, and for the third conference it is a comparable 1.6 per year for three years. Table 6 presents the publication years of published papers accepted in the four EMCGN conferences and in total. The last three rows indicate the average number of downloads and citations at the Social Science Research Network (SSRN ) website and the average number of Google Scholar citations of all papers accepted for presentation. Table 6: Average Downloads and Citations of Published EMCGN Conference Papers Conference Published in Hyderabad Seoul Sao Paolo Istanbul Total 2007 1 1 2008 2 2 2009 1 5 6 2010 5 6 11 2011 2 3 4 9 2012 6 2 4 12 2013 4 2 1 7 10-Year Report of the EMCGN 15 Table 6: Average Downloads and Citations of Published EMCGN Conference Papers (continued) Conference Published in Hyderabad Seoul Sao Paolo Istanbul Total Forthcoming 1  2 3 Total 1 12 15 23 51 SSRN* Downloads 199.75 384.95 443.11 724.68 498.45 SSRN Citations 0.25 4.85 5.50 12.56 7.21 Google Scholar** Citations 1.00 9.46 18.05 45.82 22.51 *The SSRN is a website devoted to the rapid dissemination of scholarly research in the social sciences and humanities. Ranking Web of Repositories ranked SSRN the top open-access repository in the world in 2013. Academic papers in PDF can be uploaded directly to the site by authors and are then available for worldwide free downloading. SSRN downloads and SSRN citations refer to the number of downloads through the SSRN website and citations of the EMCGN papers by papers published in SSRN e-journals. **Google Scholar is a freely accessible Web search engine that indexes the full text of scholarly literature. The Google Scholar index includes most peer- reviewed online journals, plus scholarly books and other non-peer-reviewed journals. One of the EMCGN’s objectives is to enhance the links of young researchers with international scholars and help with capacity building in emerging markets. Table 7 shows that the leading roles of U.S.-based researchers have been gradually reduced and the ratio of papers with first, second, and third authors affiliated with an emerging market institution has increased. The analysis of the data also shows that collaboration between members has increased over time. Table 7 presents the geographic distribution of first, second (if available), and third (if available) authors of accepted papers in the EMCGN conferences. The affiliation of authors refers to the location of the institution with which the authors are affiliated. Table 7: Geographic Distribution of the Affiliation of Authors Affiliation of the First Authors Affiliation of the Second Authors Affiliation of the Third Authors Hyderabad Hyderabad Hyderabad Sao Paulo Sao Paulo Sao Paulo Istanbul Istanbul Istanbul Seoul Seoul Seoul Total Total Total Australia       2 1 3   1 1 2 Argentina   1 1         Australia   1 3 4         Austria 1 1       1 1 Bangladesh   1 1         Brazil 1 7 8 1 4 1 2 8 1 1 1 1 4 Canada 1 1 1 3       1 1 China 2 2 5 9   2 5 2 9   1 2 4 7 Colombia       1 1     Denmark 1 1 1 1     Egypt   1 1         France   1 1 2         Germany       1 1 2 1 1 1 3 16 10-Year Report of the EMCGN Table 7: Geographic Distribution of the Affiliation of Authors (continued) Affiliation of the First Authors Affiliation of the Second Authors Affiliation of the Third Authors Hyderabad Hyderabad Hyderabad Sao Paulo Sao Paulo Sao Paulo Istanbul Istanbul Istanbul Seoul Seoul Seoul Total Total Total Ghana 1 1         Hong Kong 2 2 2 6 3 2 1 4 10 4 1 2 7 India 1 2 5 8   1 4 5   2 2 Israel   2 2   1 1 2   1 1 Italy 1 1 1 1     Japan           1 1 Korea, Rep. 3 1 6 3 13 5 2 7 3 17 1 2 3 6 Lebanon   1 1   1 1     Malaysia       1 1     Netherlands   1 1   1 1     New Zealand   1 1         Pakistan   1 1         Poland 1 1 1 1     Russia       1 1   1 1 2 Singapore   2 2   1 1   1 1 2 Slovakia   1 1         Sweden 1 1 1 1 2     Switzerland   1 1   1 1   1 1 Turkey   2 1 3   2 2     United Kingdom   3 3 6   1 1 2     United States 13 10 6 10 39 12 7 5 3 27 8 6 5 2 21 Ukraine 1 1 2         Venezuela   1     1             1     1 United States 13 10 6 10 39 12 7 5 3 27 8 6 5 2 21 Europe 5 4 7 16 3 2 5 1 11 1 2 3 1 7 Can / Aus / NZ 1 2 1 4 8   2 1 3   2 1 3 Emerging Markets 11 12 24 13 60 10 12 19 17 58 6 7 10 7 30 Total 30 28 38 27 123 25 21 31 22 99 15 15 20 11 61 One other objective of EMCGN is to help authors revise papers. Analysis of the publication records of papers presented at the Istanbul conference shows the publication performance reached its peak two to three years after the conference. The period between conference presentation and publication also seems to be narrowing since reaching a peak in the fourth year after the first conference, and in the second year for the second and third conferences. This demonstrates that the Network has had increasing success with helping authors revise their papers and guiding them to the right journals. 10-Year Report of the EMCGN 17 Contributions to Policy Changes It is inherently difficult to demonstrate a direct causal affect of research outcome on, say, new CG rules and regulations that may come into effect after publication of the results. Therefore, we solicited Network members’ views on the impact of their research on policy development. The responses show that the CG centers that the researchers are affiliated with are more instrumental in promoting improvements in regulations and other elements of the institutional environment. EMCGN provided a great opportunity for our " Policymakers relied more and more on research inputs. faculty and students to become aware of the extant Anecdotal evidence also suggests that in all countries research and policy imperatives related to corporate where there is collaboration between researchers and governance. It also provided a platform to India CG associations, the CG agenda is more informed by and its institutions to display their seriousness in research outcomes. A recent example of collaboration implementing higher standards of governance in inspired by EMCGN is the appointment of CGFT (Sabanci the country." University CG Forum) as the academic advisor to TKYD (CG Association of Turkey).12 And in general, awareness Subrata Sarkar of CG is greater in those countries with more established Indira Gandhi Institute of Development Research (Presenter, member of the Fourth Conference’s researchers, including those connected to the EMCGN. Organizing Committee) 12 See Ararat and Karacar, “One size does not fit all, but one network can serve all,” in ICGN Year Book 2013. 18 10-Year Report of the EMCGN 4. Overall Lessons Based on our analyses, and complemented by observations and discussions with members, the key success factors for EMCGN to continue to pursue its mission are: Institutional endorsement and financial support by • IFC has been critical in the early days reviving the Network. Financial support gradually has become less important as local hosts managed to raise local funding. The contribution from IFC has been reduced from $134,000 for the first conference to $32,000 for the fourth conference. The credibility of the host universities and the involvement of IFC in identifying potential sponsors made it easier to raise funds locally. Involvement of senior international scholars as • EMCGN coordinator Melsa Ararat, Director of Corporate discussants or keynote speakers has attracted and Governance Forum of Turkey and professor at Sabanci University. will continue to attract scholars working on CG in emerging markets to EMCGN conferences. Continuity of coordination capacity, albeit minimal, led to standardization of conference processes, which in turn help the host organizations be more efficient. The knowledge management and dissemination support provided by IFC has formed the institutional backbone • of the Network. Dissemination would have suffered if left to researchers, whereas IFC Corporate Governance Group had the capacity and the expertise to support the dissemination. The Network remained largely informal, while the local CG research centers the EMCGN is associated with evolved into more formal structures. The informal nature of the Network eliminated the need for costly administration; however, this was only possible thanks to IFC Corporate Governance Group and its donors. The Network is now more of a joint undertaking of CG research centers with internationally recognized scholars. CG advocacy centers are collaborating with and supporting the research centers, as it was envisaged during the initial stages of the Network. Despite the burgeoning research on CG in emerging markets, there remain knowledge gaps. These are issues requiring continued work, as explained in the box below. General Corporate Governance Research Gaps A paper by EMCGN’s chair and co-coordinator summarizes the current status of CG research in emerging markets (Claessens and Yurtoglu 2012). According to the paper, based on a survey, research has documented the role of CG for access to financing, cost of capital, valuation, and performance across the countries. Various other papers document differences in institutional features and their role in the effectiveness of CG mechanisms. But many issues remain to be researched, notably three: The first is ownership structures and relationships with performance. Much research in this field establishes that more concentrated ownership can be beneficial unless there is a disparity of control and cash flow rights. Too little is known, however, on ownership structures in complex groups, the role of multiple shareholders, and the dynamics of ownership structures. The role of institutional investors in emerging markets is not clearly understood. Finer studies, which analyze the links between outside shareholders such as institutional investors and their board representation, deserve further analysis. An equally important question is the role of banks 10-Year Report of the EMCGN 19 in emerging markets. While there is some research on state ownership of banks and on the group banks, the full impact of their governance in emerging markets — and in developed markets for that matter — is not yet documented. The second area is internal CG mechanisms and stakeholders’ roles. More research focused on how CG actually takes place would be very useful, even though data are hard to get. Most evidence shows that truly independent boards clearly contribute to better firm performance and higher valuations, but independence in essence is hard to establish. Relatively little evidence exists on executive compensation and managerial labor market mechanisms. A similarly under-researched area is the role of other stakeholders and the role of CG on environmental and social performance. This is an area that suffers from data issues such as CG research had in the early days. The analysis of employee representation, interactions with suppliers and civil society institutions, and issues related to corporate social responsibility are almost empty research fields in emerging- market countries. The role and governance of institutional investors is an under-researched area in emerging economies, a topic closely related to the local saving capacity and channels for encouraging savings to be invested in stock markets. This topic is closely related to pension fund development and has potential to contribute to the dynamics of institutional frameworks. The third area is enforcement, both private and public. There is some evidence that when a country’s overall CG and property-rights system are weak, voluntary and market CG mechanisms have limited effectiveness. But there are only a few studies that analyze how to enhance enforcement in such environments. The degree of public-private partnership in enhancing enforcement is presumably important, but insufficiently studied from both a theoretical and empirical perspective. More evidence is needed on how voluntary mechanisms (such as cross-listings, adopting codes of best practices, or international accounting standards) can be valuable. The interaction of cross-listings with domestic financial development is a further potentially useful research area. 20 10-Year Report of the EMCGN 5. Conclusion Experiences with research networks in emerging markets and in developing and transition countries are relatively new but already point to significant payoffs. The African Economic Research Consortium (AERC), the Global Development Network (GDN), and Bureau for Research and Economic Analysis of Development (BREAD) are some successful examples. The experience of EMCGN has confirmed once again the general value of global networks focused on emerging-markets and developing countries. Networks are effective in expanding and disseminating knowledge. They also often lead to the inception of new research projects between nodal members, and can particularly favor the participation and mentoring of young, inexperienced researchers. EMCGN has been successful in facilitating collaboration between senior international scholars and emerging-market-based scholars. EMCGN experience confirmed that incentives still are of limited power in affecting the research agendas. Academics are agents largely driven by curiosity, not necessarily by the needs of the societies or policymakers. Interactions with policy makers and practitioners can have some affect on the research agendas, but the best incentive to encourage research on specific issues is access to data and interaction with senior scholars. The Future Much of the work on CG to date, both empirical and analytical, has taken off from models of CG that exist in stable and mature economies. However, the CG challenges in many developing countries are quite different from those facing more advanced markets. Evidence shows that best practices derived from developed- market experiences are not always effective in an emerging-market context. The differences are not necessarily related to deficiencies or institutional weaknesses, but rather are largely related to ownership and control structures that are unlike those in most developed countries. These structures seem to be persistent and also have emerged in transition countries. As various crises reveal, CG is a work in progress, not only in emerging markets but also in developed markets, and it will remain so in the foreseeable future. It is thus all the more important that the transfer of knowledge, which has been largely unidirectional to date, traveling from developed to emerging markets, should flow both ways. First of all because emerging markets have come of age where governance is concerned. They have accumulated significant know-how and experience in improving corporate governance. They have developed novel approaches to CG issues. Second, there were and continue to be many failures in the oversight and performance roles of regulatory and supervisory agencies in advanced countries. There is much to be learned from CG research in general, and specifically from emerging markets, which can offer useful lessons for advanced countries. Best practices in CG will evolve around the world and expand in response to changing contexts, changing priorities, and new experiences and knowledge coming from emerging markets. Emerging-market networks such as EMCGN can be instrumental toward this end. 10-Year Report of the EMCGN 21 References Ararat, Melsa, and George Dallas. 2012. Corporate governance in emerging markets: Why it matters to investors—and what they can do about it. Private Sector Opinion 22. Washington, D.C.: IFC Global Corporate Governance Forum. Arnold, T., A. W. Butler, T. F. Crack, and A. Altintig. 2003. Impact: What influences finance research. Journal of Business 76: 343–61. Claessens, Stijn, and Joseph P. H. Fan. 2002. Corporate governance in Asia: A survey. International Review of Finance 3: 71–103. Claessens, Stijn, and B. Burcin Yurtoglu. 2012. Corporate Governance and Development — An Update. Focus Series 10. Washington D.C.: IFC Global Corporate Governance Forum. ———. 2013. 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La Porta, Rafael, Florencio Lopez-de-Silanes, Andrei Shleifer, and Robert W. Vishny. 1998. Law and finance. Journal of Political Economy 106: 1113–55. 22 10-Year Report of the EMCGN 10-Year Report of the EMCGN 23 Our donor partners S chweizerische Eidg enos s ens chaf t Conféd ération suis s e Confed erazione Sviz zera Confed eraziun s vizra Sw is s Confed eration F ed eral D epar tment of Economic Af fair s, Educ ation and Res earch E A ER State Secretariat for Economic Affairs SECO 2121 Pennsylvania Avenue, NW Telephone: +1 (202) 458 8097 cgsecretariat@ifc.org Washington, DC 20433 U.S.A. Facsimile: +1 (202) 974 4800 www.ifc.org/corporategovernance