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Commercial corporate governance ratings: an alternative view of their use and impact

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  • Photis Lysandrou
  • Daniella Parker

Abstract

The rise in the popularity of commercial corporate governance ratings is at once a source of dismay and a cause for alarm: the former because they do not appear to give accurate predictions of corporate performance and the latter because they add to the pressure on corporations to adapt their governance structures to a benchmark model that takes no account of the conditions in which they operate. This paper gives an alternative view of the potential use and impact of the commercially marketed governance ratings. It argues that their importance to institutional investors lies in providing them with information that accurately summarises corporate loyalty to shareholders rather than accurately predicts corporate performance. It goes on to argue that the commercial governance ratings can bring benefits to an economy by contributing to a new type of managerial control mechanism that is not only more efficient than hostile takeovers and stock options but also helps to reduce the governance role of these instruments.

Suggested Citation

  • Photis Lysandrou & Daniella Parker, 2012. "Commercial corporate governance ratings: an alternative view of their use and impact," International Review of Applied Economics, Taylor & Francis Journals, vol. 26(4), pages 445-463, July.
    • Handle: RePEc:taf:irapec:v:26:y:2012:i:4:p:445-463
    DOI: 10.1080/02692171.2011.619971
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    References listed on IDEAS

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    1. Marc Goergen, 2005. "Corporate Governance Convergence: Evidence From Takeover Regulation Reforms in Europe," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 21(2), pages 243-268, Summer.
    2. Bank for International Settlements, 2003. "Incentive structures in institutional asset management and their implications for financial markets," CGFS Papers, Bank for International Settlements, number 21, december.
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    Cited by:

    1. Photis Lysandrou, 2016. "The colonization of the future: An alternative view of financialization and its portents," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 39(4), pages 444-472, October.
    2. Charl de Villiers & Ruth Dimes, 2021. "Determinants, mechanisms and consequences of corporate governance reporting: a research framework," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 25(1), pages 7-26, March.

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