Corporate governance ratings as a means to reduce asymmetric information
Can corporate governance ratings reduce problems of asymmetric information between companies and investors? To answer this question, we set out to examine the information basis for providing such ratings by reviewing corporate governance attributes that are required or recommended in laws, accounting standards and codes, respectively. After that, we scrutinize and organize the publicly available information on the methodologies actually used by rating providers. However, important details of these methodologies are treated as confidential property, thus we approach the evaluation of corporate governance ratings as a means to reduce asymmetric information in a more general manner. We propose that the rating process may be seen as consisting of two general activities, namely a data reduction phase, and a data weighting, aggregation and classification phase. Findings based on a Danish data set suggest that rating providers by selecting relevant attributes in an intelligent way can improve the screening of companies according to governance quality. In contrast, it seems questionable that weighting, aggregation and classification of corporate governance attributes considerably improve discrimination according to governance quality
|Date of creation:||25 Apr 2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Fax: + 45 86 15 19 43
Web page: http://www.asb.dk/about/departments/bs.aspx
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul Gompers & Joy Ishii & Andrew Metrick, 2003.
"Corporate Governance And Equity Prices,"
The Quarterly Journal of Economics,
MIT Press, vol. 118(1), pages 107-155, February.
- Paul A. Gompers & Joy L. Ishii & Andrew Metrick, 2001. "Corporate Governance and Equity Prices," NBER Working Papers 8449, National Bureau of Economic Research, Inc.
- Paul A. Gompers & Joy L. Ishii & Andrew Metrick, 2002. "Corporate Governance and Equity Prices," Center for Financial Institutions Working Papers 02-32, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Howard Sherman, 2004. "Corporate Governance Ratings," Corporate Governance: An International Review, Wiley Blackwell, vol. 12(1), pages 5-7, 01.
- Heidi Vander Bauwhede & Marleen Willekens, 2008. "Disclosure on Corporate Governance in the European Union," Corporate Governance: An International Review, Wiley Blackwell, vol. 16(2), pages 101-115, 03.
- Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 1999. "Aggregating governance indicators," Policy Research Working Paper Series 2195, The World Bank.
- Yin-Hua Yeh, 2005. "Do Controlling Shareholders Enhance Corporate Value?," Corporate Governance: An International Review, Wiley Blackwell, vol. 13(2), pages 313-325, 03.
- Frankel, Richard & Li, Xu, 2004. "Characteristics of a firm's information environment and the information asymmetry between insiders and outsiders," Journal of Accounting and Economics, Elsevier, vol. 37(2), pages 229-259, June.
- Chi-Kun Ho, 2005. "Corporate Governance and Corporate Competitiveness: an international analysis," Corporate Governance: An International Review, Wiley Blackwell, vol. 13(2), pages 211-253, 03.
- Wolfgang Drobetz & Andreas Schillhofer & Heinz Zimmermann, 2004. "Corporate Governance and Expected Stock Returns: Evidence from Germany," European Financial Management, European Financial Management Association, vol. 10(2), pages 267-293.
- Frederic S. Mishkin, 1999. "Global Financial Instability: Framework, Events, Issues," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 3-20, Fall.
When requesting a correction, please mention this item's handle: RePEc:hhb:aarbfr:2005-004. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Helle Vinbaek Stenholt)
If references are entirely missing, you can add them using this form.