The Handbook of Board Governance, 3rd Edition

74External and Internal Corporate Governance Mechanisms in Emerging Markets

Natalie Tershakowec, BCom, JD

Lawyer, Wildeboer Dellelce LLP

Introduction

Emerging markets play a prominent role in today’s global economy, owing to their rapid economic growth and investment potential. The top 20 emerging markets accounted for “34 percent of the world’s nominal gross domestic product” in 2020 (Duttagupta and Pazarbasioglu, 2021). Brazil, Russia, India, China, and South Africa (commonly referred to as the “BRICS countries”) are the five largest emerging markets and have a combined gross domestic product of US$24.44 trillion (O’Neill, 2021; CFI Team, 2021). In addition, companies operating in emerging markets are increasingly involved in cross-border merger and acquisition (M&A) transactions. In 2021, for example, transactions involving emerging markets totaled US$1.3 trillion, of which transactions in the technology sector accounted for US$246.7 billion (Refinitiv, 2021). Now more than ever investors, businesspersons, and directors are likely to encounter companies from emerging markets, given their prominent role in the global economy.

Analyzing corporate governance for companies operating in emerging markets or planning to enter emerging markets can be extremely tough. Emerging markets can drastically differ in their corporate structures, disclosure requirements, political and financial market environments, regulatory standards and legal systems, while sharing similar characteristics, ...