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Gaming governance: cosmetic or real corporate governance changes?

Author

Listed:
  • James S. Ang

    (Florida State University)

  • Wei Mike Chen

    (Fuzhou Institute of Technology)

  • Shan Li

    (Xiamen University)

  • Lihong Wang

    (Xiamen University)

Abstract

Using a large sample of firms with corporate governance ratings over the period 2004–2010, we propose that a firm’s governance level depends on the balance between private benefits and the career value of top managers. We find an apparent improvement in the corporate governance quotient (CGQ) when there is a shock to managers’ career value. However, a significant proportion of firms that initially improve their CGQ subsequently reverse these governance changes; a later reduction in external pressure is positively associated with CGQ reversal. Finally, stock market investors are fooled by temporary governance improvements.

Suggested Citation

  • James S. Ang & Wei Mike Chen & Shan Li & Lihong Wang, 2022. "Gaming governance: cosmetic or real corporate governance changes?," Review of Quantitative Finance and Accounting, Springer, vol. 59(1), pages 91-121, July.
    • Handle: RePEc:kap:rqfnac:v:59:y:2022:i:1:d:10.1007_s11156-022-01038-y
    DOI: 10.1007/s11156-022-01038-y
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    More about this item

    Keywords

    Governance rating; External pressure; Agency cost; CEO tenure; Institutional shareholding;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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