**5. Conclusion**

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 performance in the emerging markets.

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 ROA (performance).

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 the governance-performance relationship among EM firms. That is, higher market-risk firms fail to experience an improvement in their financial performance even while applying US best practice governance rules.

In general, the results indicate that non cross-listed EM firms voluntarily "bond" themselves to US best practice governance rules in an effort to become integrated into the global financial market; presumably to attract capital and customers. Non-cross-listed EM firms appear to experience a benefit from building a stronger governance structure and it is reflected in better performance over time. Nevertheless, enhancing the governance structure of a firm ultimately does not appear to compensate for the presence of risk – higher risk firms experience substantially less reward for stalwart governance. In this regard, reducing the incidence of CEO duality looks like an effective solution to protect investors and creditors from risk-taking activities of overly powerful managers and to increasing the impact on long-term performance.
