Tokyo Exchange and IFC join to improve governance in emerging economies

The Tokyo Stock Exchange Group (TSEG) has entered into an agreement with the International Finance Corporation (IFC), a member of the World Bank Group, to collaborate on efforts to enhance capital markets in emerging economies. The two groups hope to do this by improving corporate governance standards that will protect investors and trigger economic growth.

The deal aims to strengthen the operation and regulatory landscape of the emerging markets, while restoring investor confidence through sharing knowledge and expertise in developing information technology infrastructure and implementing corporate governance codes for listed companies, says the IFC.

According to the agreement, the IFC will team up via the Global Corporate Governance Forum, a multi-donor trust fund with TSEG, the holding company of the Tokyo Stock Exchange (TSE).

The forum seeks to promote the growth of the private sector and reduce the vulnerability of emerging markets in the event of another financial meltdown with international, regional and local institutions, the IFC confirms.

Additionally, it provides incentives to corporations to execute operations in an efficient, transparent, sustainable, and socially responsible way.

‘Strong corporate governance standards and market infrastructure contribute to raising companies’ performance and investors’ confidence, helping to bring much-needed capital for growth,’ says Rachel Kyte, IFC vice president for business advisory services, in a statement.

The connection between corporate governance and market performance in Asia has been made before. Corporate Secretary previously reported that a study from the credit ratings agency, Fitch, revealed that Chinese companies, for example, have weak corporate governance practices.

Investor concerns about fraud and US accounting firms’ questioning of managements’ representation of audit numbers have turned up the heat on Chinese companies to improve governance. ‘It seems overseas investors are currently undertaking the job that China’s underdeveloped capital market is not doing: that of challenging Chinese management to adopt higher standards,’ the Fitch report says.

[Article by Aarti Maharaj, Corporate Secretary]