IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/42896.html
   My bibliography  Save this paper

Corporate governance rating in a small open capital market: Methodology and applications in the Greek market

Author

Listed:
  • Spanos, Loukas
  • Tsipouri, Lena
  • Xanthakis, Manolis

Abstract

The need of institutional investors to evaluate the Corporate Governance (CG) practices of listed companies resulted in many attempts to construct the CG rating methodologies. This paper, in response to this situation, attempts to quantify the compliance of large capitalization Greek companies with international best practices. The methodology consists of a questionnaire reflecting the Greek CG code, which basically replicates the OECD principles. Other wellregarded CG codes are also taken into account. Then, a rating system based on CG indicators is constructed and applied for the years 2001 and 2003. The total rating results for the years 2001 and 2003 demonstrate a relatively satisfactory improvement. The highest compliance is in the category of shareholder rights, while weak compliance appears in the last category, which incorporates commitment to CG, CSR and the relations with shareholders. The exercise, using practically all agreed principles of the OECD, could demonstrate a reasonable degree of compliance of the average company rated. Its limitation in that respect is that it could not satisfy investigations on convergence. The indicators used are highly pertinent to measure compliance but not convergence, which is not within the initial targets and needs a longer time series analysis. The methodology is applied in a small open economy and may have significant implications in other similar capital markets. Methodologically, the merit of the exercise lies in its approach toward the creation of "collectively subjective" weightings, and is valuable to institutional investors, policymakers, regulators and academics. The upgrading of the Greeek capital market to a mature market status and the global competition for capital has boosted the CG debate in Greece. In addition, the recent corporate failures and financial scams around the world have increased awareness that proper CG is fundamental to the efficient operation of capital markets. The need of institutional investors to evaluate the CG practices of the listed companies resulted in many attempts to construct CG rating methodologies. This paper presents an attempt to quantify the compliance of large capitalization Greek companies with international best practices. Firstly, the literature on CG ratings is reviewed. Secondly, a brief history of the CG in Greece is presented. Then, the structure of our CG rating methodology and the results are described. Finally, the findings and proceedings with some critical points are summarized.

Suggested Citation

  • Spanos, Loukas & Tsipouri, Lena & Xanthakis, Manolis, 2006. "Corporate governance rating in a small open capital market: Methodology and applications in the Greek market," MPRA Paper 42896, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:42896
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/42896/1/MPRA_paper_42896.pdf
    File Function: original version
    Download Restriction: no

    References listed on IDEAS

    as
    1. Loukas Spanos & Lena Tsipouri & Manolis Xanthakis, 2005. "Corporate Governance Rating and Family Firms: The Greek Case," Finance 0503011, University Library of Munich, Germany.
    2. repec:hrv:faseco:30728046 is not listed on IDEAS
    3. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
    4. Christian Strenger, 2004. "The Corporate Governance Scorecard: a tool for the implementation of corporate governance," Corporate Governance: An International Review, Wiley Blackwell, vol. 12(1), pages 11-15, January.
    5. Shleifer, Andrei & Vishny, Robert W, 1997. "A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    6. Harilaos Mertzanis, 2001. "Principles of Corporate Governance in Greece," Corporate Governance: An International Review, Wiley Blackwell, vol. 9(2), pages 89-100, April.
    7. Lena Tsipouri & Manolis Xanthakis, 2004. "Can Corporate Governance be Rated? Ideas based on the Greek experience," Corporate Governance: An International Review, Wiley Blackwell, vol. 12(1), pages 16-28, January.
    8. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
    9. Loukas Spanos, 2005. "Corporate governance in Greece: developments and policy implications," Finance 0502017, University Library of Munich, Germany.
    10. Black, Bernard, 2001. "The corporate governance behavior and market value of Russian firms," Emerging Markets Review, Elsevier, vol. 2(2), pages 89-108, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    corporate governance; rating; Greece;

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:42896. 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: (Joachim Winter). General contact details of provider: http://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.