COMPLIANCE WITH CORPORATE GOVERNANCE CODES IN EMERGING ECONOMIES. DO ROMANIAN LISTED COMPANIES "COMPLY OR EXPLAIN"?

We analyze the attitude of Romanian companies listed on the Bucharest Stock Exchange towards the "comply-or-explain" principle under which they fulfill their corporate governance obligations. To this end we hand-collect all "comply-or-explain" statements available for these companies in 2010 and 2011. We investigate the compliance and noncompliance cases, the quality of their explanations in case of non-compliance and we perform additional analyses by companies' characteristics. We find that only one in two Romanian listed companies disclose the "comply-or-explain" statement on their website. Second, we find that the companies in our sample report that they comply with almost two thirds of the questions in the statement, but we also document cases of non-compliance without any explanations provided. We additionally report on the increase of Board members' knowledge of corporate governance principles over time, as reported in the companies' "comply-or-explain" statement. Finally, we find that larger listed Romanian companies comply more with the principles of the corporate governance code, while the larger first-tier listed companies have better disclosures regarding non-compliance cases.