Gaming governance: cosmetic or real corporate governance changes?

James S. Ang (), Wei Mike Chen (), Shan Li () and Lihong Wang ()
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James S. Ang: Florida State University
Wei Mike Chen: Fuzhou Institute of Technology
Shan Li: Xiamen University
Lihong Wang: Xiamen University

Review of Quantitative Finance and Accounting, 2022, vol. 59, issue 1, No 4, 121 pages

Abstract: Abstract Using a large sample of firms with corporate governance ratings over the period 2004–2010, we propose that a firm’s governance level depends on the balance between private benefits and the career value of top managers. We find an apparent improvement in the corporate governance quotient (CGQ) when there is a shock to managers’ career value. However, a significant proportion of firms that initially improve their CGQ subsequently reverse these governance changes; a later reduction in external pressure is positively associated with CGQ reversal. Finally, stock market investors are fooled by temporary governance improvements.

Keywords: Governance rating; External pressure; Agency cost; CEO tenure; Institutional shareholding (search for similar items in EconPapers)
JEL-codes: G24 G34 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s11156-022-01038-y

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