**Author details**

**5. Conclusion**

\*

as standard errors in parentheses.

166 Financial Management from an Emerging Market Perspective

Significance at the 0.1 level. \*\*Significance at the 0.05 level. \*\*\*Significance at the 0.01 level.

mance in the emerging markets.

ROA (performance).

This study examines the association between corporate governance and financial performance among cross-listed ADRs and non-cross listed EM firms. It appears unlikely that cross-listed ADRs, which are required to submit to regulatory oversight and must remain in compliance with the US governance rules, experience an improvement in performance as a result of the enhanced governance structure. In fact, ADR firms do not appear to perform any better than non-cross listed EM firms, which do not abide by these rules. The study further investigates whether market risk (i.e., Beta) has a moderating effect on the governance-performance relationship and finds that risk reduces the positive association between governance and perfor-

This table shows the outcomes of cross-sectional time-series two-step GLS regressions of return on assets (ROA) and market value (measured by market-to-book ratio) on the governance score, four individual governance standards and control variables for the level 2 and 3 ADRs. It reports the standardized coefficients on the independent variables as well

**ROA Market value (1) (2) (3) (4)**

Observations 358 212 358 212 R2 0.679 0.698 0.883 0.909 Chi2 179.5 157.1 593.1 563.0

**Table 6.** Two-step GLS regressions of governance factors on ROA and market value for level 2&3 ADRs.

In this study, a two-step Generalized Least Squares (GLS) random effects model is employed to capture both cross-sectional and time-series variation in the data. The results of estimating various models reveal that enhanced governance leads to improved financial performance among non-cross-listed EM firms, when the strength of a firm's corporate governance is measured as a cumulative score (in this article the variable Governance Score). However, there is no evidence that any of the individual governance measures (i.e., CEO Duality, Independent Directors, Ethics Policy and Committees) affect EM firm performance, when performance is measured as ROA. Also, consistent with findings presented in the extant literature [10], we find that a cumulative corporate governance score provides no evidence of an impact on the ROA of cross-listed ADR firms. Still, among the individual governance indicator variables, CEO Duality produces a mitigating effect on

When the market-to-book equity ratio (M/B) is employed as the measure of performance, ADRs with a formal ethics policy and greater established committees exhibit a reduction in their performance. In contrast, an enhanced governance structure improves the M/B of noncross-listed EM firms, and also restricting the dual role of the CEO appears to have a positive effect. Finally results of the study also show that market risk is a factor that negatively affects Naz Sayari<sup>1</sup> \* and Bill Marcum2

\*Address all correspondence to: nazsayari@yahoo.com

1 Middle East Technical University, Department of Business Administration, Ankara, Turkey

2 Wake Forest University, School of Business, Winston-Salem, NC, USA
