TY - JOUR
T1 - Evaluating the link between commercial governance ratings and firm performance in a cross-European setting
AU - Núñez Izquierdo, Manuel E.
AU - Garcia-Blandon, Josep
N1 - Publisher Copyright:
© 2017, © Emerald Publishing Limited.
PY - 2017
Y1 - 2017
N2 - 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.
AB - 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.
KW - Commercial ratings
KW - Corporate governance
KW - ISS Quickscore
KW - Performance
UR - http://www.scopus.com/inward/record.url?scp=85033718368&partnerID=8YFLogxK
UR - https://www.webofscience.com/api/gateway?GWVersion=2&SrcApp=pure_univeritat_ramon_llull&SrcAuth=WosAPI&KeyUT=WOS:000415340700002&DestLinkType=FullRecord&DestApp=WOS_CPL
U2 - 10.1108/MD-11-2016-0830
DO - 10.1108/MD-11-2016-0830
M3 - Article
AN - SCOPUS:85033718368
SN - 0025-1747
VL - 55
SP - 2089
EP - 2110
JO - Management Decision
JF - Management Decision
IS - 10
ER -