Do Corporate Governance Ratings Change Investor Expectations? Evidence from Announcements by Institutional Shareholder Services

Paul M. Guest and Marco Nerino

Working Papers from Centre for Business Research, University of Cambridge

Abstract: This paper examines empirically the announcement effect of commercial corporate governance ratings on share returns. Rating downgrades by Institutional Shareholder Services (ISS) are associated with negative returns of – 1.14% over a 3-day announcement window. The returns are highly correlated with the proprietary analysis of ISS and are decreasing in agency costs, consistent with ratings providing independent information on underlying corporate governance quality. We thus show that the influence and impact of ISS extends beyond proxy recommendations and subsequent voting outcomes. Our findings contrast with the insignificant price impact of Daines, Gow, and Larcker (2010), whose analysis we replicate and successfully reconcile to ours by pooling upgrades and downgrades together.

Keywords: Corporate Governance Ratings; Information Intermediaries; Event Study; Information Content; Institutional Shareholder Services (search for similar items in EconPapers)
JEL-codes: G14 G24 G34 (search for similar items in EconPapers)
Date: 2019-12
New Economics Papers: this item is included in nep-cfn
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.jbs.cam.ac.uk/wp-content/uploads/2023/05/cbrwp515.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cbr:cbrwps:wp515

Access Statistics for this paper

More papers in Working Papers from Centre for Business Research, University of Cambridge
Bibliographic data for series maintained by Ruth Newman ().