Investing in BRIC Countries: Evaluating Risk and Governance in Brazil, Russia, India, and China - Hardcover

BORODINA

Hardcover

ISBN 10: 0071664068 ISBN 13: 9780071664066

Verlag: McGraw Hill, 2010

Inhaltsangabe

Chart a course for success in the fertile terrain of BRIC investing! The world's largest and fastest-growing emerging markets are those of the BRIC nations-Brazil, Russia, India, and China. Combined, these countries house more than 40 percent of the world's population, and their respective GDPs are growing at an impressive rate. This economic success comes partly from a trend toward good corporate governance, a concept virtually unheard of in these four nations just a decade ago. Still, the BRICs have a long way to go. Corruption, doubledealings, and other conflicts of interest are regular business practices for far too many companies. Although investing in BRIC nations can be wildly profitable, you must familiarize yourself with the realities of their corporate governance to avoid catastrophe. With Investing in BRIC Countries, you are equipped with the best available tool for detecting the signs of poor governance. Edited by Standard & Poor's® equity research and governance group, it details the group's highly successful approach to analyzing risks in emerging economies. With case studies illustrating the effectiveness of corporate governance scrutiny, Investing in BRIC Countries examines the economic structure and governance status of each BRIC nation-and then explains how to: Detect the malevolent influences of a powerful minority of shareholders Protect yourself from misleading or false audits and risk assessments Recognize regulatory weaknesses with regards to shareholder rights Distinguish effective boards of directors from weak or corrupt ones As the financial crises in Mexico, Russia, and Asia during the 1990s prove, corporate governance is the pivot on which an emerging market's success or failure hinges. Before entering one or more BRIC markets, perform the due diligence they require. Investing in BRIC Countries is the best tool available for mitigating your exposure to risky deals and other problems that can arise when dealing with international companies.

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Über die Autorin bzw. den Autor

Svetlana Borodina is director of corporate governance at Standard & Poor's(R) Equity Research in Moscow. She served in a number of senior executive positions in the areas of investor relations and financial communications with TNKBP and Sibneft oil companies.
Oleg Shvyrkov is associate director for Standard & Poor's(R) Governance Services group and serves as lead analyst on corporate governance scores and GAMMA scores at MTS, MDM Bank, EroChem, and other companies in Russia, Kazakhstan, and Brazil. The authors live in Moscow, Russia.

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The definitive guide to evaluatingcorporate governance in theworld’s largest emerging markets

Investing in Brazil, Russia, India, and China is a whole new game. Inorder to avoid nightmare scenarios, you have to inform yourself aboutthe corporate governance problems rampant in BRIC companies—generalcorruption, weak boards of directors, individual shareholders wieldingundue influence, and other critical conflicts of interest. You’ll find, though,that the benefits are well worth it.

Investing in BRIC Countries explains:

• Why governance is critical to international investing success
• The secrets of S&P’s® methodology for analyzing governance inemerging markets
• How to apply advanced thinking based on a number of real-life cases

Written by two high-level figures at Standard & Poor’s® who apply theircompany’s own methods and processes, this is a detailed road map toanalyzing corporate governance in the world’s top emerging markets, helpingyou make sound decisions and proper evaluations prior to investingin them.

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Investing in BRIC COUNTRIES

Evaluating Risk and Governance in Brazil, Russia, India & China

By SVETLANA BORODINA, OLEG SHVYRKOV, JEAN-CLAUDE BOUIS

The McGraw-Hill Companies, Inc.

Copyright © 2010 McGraw-Hill, Inc.
All rights reserved.

ISBN: 978-0-07-166406-6

Contents

Foreword Good Governance Does Make a Difference Peter Montagnon
Preface Why Governance Is Key to the Future of BRIC Countries Svetlana 
Borodina and Oleg Shvyrkov
PART 1 Introducing the BRICs and Their Governance Status
Chapter 1 A Guiding Light for Investors in Brazil Eduardo G. Chehab
Chapter 2 Corporate Governance Is Advancing in Russia Oleg Shvyrkov
Chapter 3 Corporate Governance Is Growing Modestly in India Preeti S. 
Manerkar
Chapter 4 Moving toward Accountability in China Warren Wang
PART 2 Fundamentals of Emerging Market Governance Analysis Principal 
Contributor: Oleg Shvyrkov
Chapter 5 Ownership Influences: The State, Company Founders, Majority 
Shareholders, and Other Dangers
Chapter 6 Shareholder Rights: Do You Really Have Them?
Chapter 7 Transparency, Audit, and Risk Management: Risk-Averse, 
Risk-Adjusted, and Just Plain Risky
Chapter 8 Board Effectiveness, Strategy, and Compensation: Boards of 
Directors versus Potemkin Villages
PART 3 Case Studies
Chapter 9 Wimm-Bill-Dann Foods OJSC (Russian Federation) Oleg Shvyrkov 
and Anna Grishina
Chapter 10 EuroChem Mineral and Chemical Co. OJSC (Russian Federation) 
Oleg Shvyrkov and Anna Grishina
Appendix A Transparency and Disclosure by Russian Companies 2008: 
Insignificant Progress along with Fewer IPOs
Appendix B Transparency and Disclosure 2008: Disclosure Levels for China's 
Top 300 Companies Lag Far Behind Global Best Practices Warren Wang
Index

Excerpt

CHAPTER 1

A Guiding Light for Investors in Brazil

Eduardo G. Chehab

Introduction and Executive Summary

How Brazilian Corporate Governance Bloomed

Corporate governance is a set of practices designed to optimize a company'sperformance, protect stakeholders (investors, employees, and creditors), andfacilitate access to capital. The analysis of corporate governance practices asit is applied to securities markets encompasses transparency of ownership andcontrol, equal treatment of shareholders, disclosure of information, boardeffectiveness, and risk management controls, among other topics.

For investors, this analysis is an important aid in making investment decisions.These practices determine the kind of role investors may play in a company,enabling them to influence its performance. Good corporate governance practicesincrease a company's value and reduce the cost of capital, increasing theviability of securities markets as sources of funding. Companies with agovernance system that protects all investors tend to have higher valuationsbecause investors recognize that everyone will receive the due and appropriatereturn on his or her investments.

In the last few years significant reforms have been made in Brazilian corporategovernance, including the introduction of the New Market (Novo Mercado) conceptand changes in company and securities law that stem from a conviction thatcapital markets should play a much larger role in the country's economicdevelopment than they did in the past. Proponents of capital markets in Brazilbelieve that one of the keys to a healthy and successful market is theintroduction and support of strong corporate governance measures.

Historically, Brazil's capital markets played only a minor role in providingcompanies' financing needs, which were met from companies' retained earnings andfunding provided by financial institutions and state-owned entities. However,the country's enormous social demands and scarce financial resources havelimited the state's ability to maintain its role as a capital provider. Agradual change in funding availability started with the opening of the Brazilianmarkets in the 1990s. Companies faced intense international competition andrequired more capital to upgrade and meet competitive threats. Those capitaldemands could be met only by developing and expanding local capital markets andimproving the domestic economy. In support of those goals, new laws addressedgovernance problems and focused primarily on greater transparency and disclosurerequirements as well as protection of the rights of minority shareholders.

The Brazilian stock market has developed strongly since 2006. Almost U.S.$40billion was raised through equity issuances, along with U.S.$78 billion throughissuances of debentures in the period 2006–2008. At the same time,investor concerns about corporate governance also increased, mainly in regard tothe rights of minority shareholders and corporate enterprise risk management. InNovember 2008, to help address those concerns in Brazil, Standard & Poor's (S&P)launched the GAMMA (Governance, Accountability, Management Metrics, andAnalysis) score, an important tool for selecting companies with higher corporategovernance levels and guiding companies in improving their governance policies.

Market Infrastructure

Summary of Economic History: Brazil Emerges as a Resourceful Dynamo

When Portuguese explorers arrived in Brazil in 1500, the native tribes, totalingabout 2.5 million people, had lived virtually unchanged since the Stone Age.From Portugal's colonization of Brazil (1500–1822) until the late 1930s,the market elements of the Brazilian economy relied on the production of primaryproducts for export, such as sugar, precious minerals, and coffee. Thepost–World War II period up to 1962 featured intense import substitution,especially of consumer goods. A period of rapid industrial expansion andmodernization occurred between 1968 and 1973. Import substitution of basicinputs and capital goods and the expansion of manufactured goods exportshighlighted the 1974–1980 period.

However, the following years, mainly the period 1981–1994, were marked byconsiderable difficulties because of the world oil crisis, a moratorium onpayments of the external debt in 1982 and 1987, and the consequent low increasein gross domestic product (GDP) (average of only 1.4% per year). Thosedifficulties were fueled by several unsuccessful economic stabilization programsthat were aimed at reducing high inflation rates and the impeachment of apresident, Fernando Collor de Mello, in 1992 for corruption.

Finally, in 1994, the Real Plan was implemented, and the annual inflation ratedropped from more than 5,000% to 20% in 1996 and eventually in the range of 5%.

The successful Real Plan was based on three pillars:

• Monetary reform

• Further opening of the economy

• Privatization of several state-owned companies in the steel, power, banking,mining, and telecommunication segments, raising around U.S.$100 billion

After another period of ups and downs, the economy began to grow more rapidlystarting in 2003, strongly influenced by the worldwide trade boom. GDP grew 5.7%in 2004, 3.2% in 2005, 3.8% in 2006, and 5.4% in 2007. In 2008, the economy grewanother 5%. In the beginning...

Details zur Ausgabe

• Verlag: McGraw Hill
• Erscheinungsdatum: 2010
• Sprache: Englisch
• ISBN 10: 0071664068
• ISBN 13: 9780071664066
• Einband: Gebundene Ausgabe
• Anzahl der Seiten: 334
• Kontakt zum Hersteller: Nicht verfügbar
• Verantwortliche Person: gpsr@libri.de; gpsr@libri.de; ; Friedensallee 273; Hamburg; 22763; Deutschland