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


  • Photis Lysandrou
  • Daniella Parker


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

    1. Engelbert Stockhammer & Eckhard Hein & Lucas Grafl, 2011. "Globalization and the effects of changes in functional income distribution on aggregate demand in Germany," International Review of Applied Economics, Taylor & Francis Journals, vol. 25(1), pages 1-23.
    2. Taylor, Lance, 1985. "A Stagnationist Model of Economic Growth," Cambridge Journal of Economics, Oxford University Press, vol. 9(4), pages 383-403, December.
    3. Arestis, Philip & McCauley, Kevin & Sawyer, Malcolm, 2001. "An Alternative Stability Pact for the European Union," Cambridge Journal of Economics, Oxford University Press, vol. 25(1), pages 113-130, January.
    4. Engelbert Stockhammer & Özlem Onaran & Stefan Ederer, 2009. "Functional income distribution and aggregate demand in the Euro area," Cambridge Journal of Economics, Oxford University Press, vol. 33(1), pages 139-159, January.
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