The Usefulness of Corporate Governance Ratings

Hitz, Joerg-Markus; Lehmann, Nico

doi:10.2139/ssrn.2042019

Cited by 4 publications

(6 citation statements)

References 34 publications

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“…Daines, Gow, and Larcker [], for example, investigate the predictive power of three commercial governance ratings and provide inconclusive or weak evidence for a positive economic role. Similarly, cross‐country evidence by Hitz and Lehmann [] suggests that governance ratings are not incrementally informative, beyond the publicly available information the ratings aggregate. Thus, the economic role of governance analysts remains an open question.…”

Section: Introductionmentioning

confidence: 99%

“…First, it adds to the literature on governance analysts. Studies commonly focus on one important, observable outcome of governance analysts—corporate governance ratings—and examine whether these ratings correlate with (or predict) firm outcomes (e.g., Ertugrul and Hegde [], Daines, Gow, and Larcker [], Renders, Gaeremynck, and Sercu [], Hitz and Lehmann []). These studies, however, do not provide conclusive evidence on whether and how governance analysts create value for investors.…”

Section: Introductionmentioning

confidence: 99%

“…The economic roles of vendors of governance ratings versus proxy voting services differ. The former provide detailed information on the firm's governance structure (Daines, Gow, and Larcker [], Hitz and Lehmann []), while the latter facilitate investor votes at annual meetings (Ertimur, Ferri, and Oesch [], Calluzzo and Dudley [], Hitz and Lehmann []). Governance rating services end up being an input to proxy advisory, rather than a comparable service.…”

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confidence: 99%

“…See Bauer, Guenster, and Otten [], Epps and Cereola [], Ertugrul and Hegde [], Daines, Gow, and Larcker [], and Hitz and Lehmann [] for inconclusive evidence as well as Brown and Caylor [], Derwall and Verwijmeren [], Bauer et al. [], Brown and Caylor [], Vander Bauwhede [], and Renders, Gaeremynck, and Sercu [] for evidence in favor of a positive firm‐value effect.…”

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confidence: 99%

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Do Corporate Governance Analysts Matter? Evidence from the Expansion of Governance Analyst Coverage

Lehmann

2019

J of Accounting Research

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This paper examines the economic consequences of the initiation of governance analyst coverage. Governance analysts process, enhance, and * University of Goettingen.Accepted by Christian Leuz. This paper is based on one part of my dissertation at the Georg-August University of Goettingen. I am deeply indebted to Jörg-Markus Hitz (dissertation chair) for his continuous support and excellent guidance. I am very grateful to the editor and an anonymous referee for their excellent guidance and constructive suggestions throughout the whole review process. The paper has further benefited from the insights of Ulf Brüggemann, Hans B. Christensen, Rafael Copat (discussant), N. LEHMANN disseminate governance-related information to capital market participants via, for example, governance reports and ratings. Using an exogenous shock in the United Kingdom, I find that an increase in governance analyst coverage results in increased governance quality, improved liquidity, increased financial analyst following, and improved investor breadth. These findings are consistent with governance analysts creating value for firms via monitoring, information dissemination/production, and investor recognition. JEL codes: G15; G23; G24; G30; G34; M40; M41

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

mentioning

confidence: 99%

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confidence: 99%

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Do Corporate Governance Analysts Matter? Evidence from the Expansion of Governance Analyst Coverage

Lehmann

2019

J of Accounting Research

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“…As far as research conducted within Europe, which is the focus of this paper, there are also mixed results. Some studies show that CGR have a positive and significant impact on firm performance, as reflected by Hitz and Lehmann (2015) with a sample of UK and German companies, and Renders et al (2010) on a set of European companies. Conversely, Bauer et al (2004) failed to document a consistent significant relationship between CGR and performance for distinct UK and European Monetary Union data sets.…”

Section: Review Of the Literaturementioning

confidence: 99%

Evaluating the link between commercial governance ratings and firm performance in a cross-European setting

Izquierdo

García-Blandón

2017

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Purpose The purpose of this paper is to explore the ability of commercial governance ratings (CGR) to predict firm performance. Design/methodology/approach Based on the review of the corporate governance literature, the authors pose five hypotheses on the relationship between CGR and firm performance. Then, the authors test these hypotheses for the latest version of the Institutional Shareholder Services Inc. (ISS) index (Quickscore) with a sample of firms formed by the constituents of the Standard and Poor’s Europe 350 stock market index. Findings The authors have not found a consistent significant relationship between Quickscore ratings and firm performance. This main result holds across a variety of checks. Research limitations/implications Some of the additional analyses are conducted with rather small samples. The results of these analyses have to be carefully taken. Recommendations for further research are offered. Practical implications The results call into question the usefulness of CGR, marketed by influential consultant companies, and which are becoming increasingly popular among investors, as reliable predictors of firm performance. Originality/value Despite an increasing body of research on the use of CGR as predictors of firm performance, the available research is heavily concentrated in the US market. No previous study has explored this relationship using the recently developed ISS index Quickscore in a cross-European setting. The use of a cross-country sample of companies allows the authors to address the impact of institutional factors on the CGR-firm performance relationship. Moreover, the authors do not limit the study to the overall scores of the index but examine also the partial scores (pillars) which intend to assess specific dimensions of governance. This makes the evaluation of the relationship more complex and challenging.

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Corporate Governance as an Antidote to Corruption in Emerging Markets

Windsor

2014

CSR, Sustainability, Ethics &Amp; Governance

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The Usefulness of Corporate Governance Ratings

Cited by 4 publications

References 34 publications

Do Corporate Governance Analysts Matter? Evidence from the Expansion of Governance Analyst Coverage

Do Corporate Governance Analysts Matter? Evidence from the Expansion of Governance Analyst Coverage

Evaluating the link between commercial governance ratings and firm performance in a cross-European setting

Corporate Governance as an Antidote to Corruption in Emerging Markets

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