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Well-governed firms in Korea traded at a premium of 160% to poorly governed firms

Black, Bernard S.; Jang, Hasung; Kim, Woochan. “Predicting Firms’ Corporate Governance Choices: Evidence from Korea.” University of Texas Law School Working Paper No. 39, August 2004

Brazil-based firms with the best corporate governance ratings garnered 2004 P/E ratios that were 20% higher than firms with the worst governance ratings

Erbiste, Bruno. “Corporate Governance in Brazil: Is There a Link Between Corporate Governance and Financial Performance in the Brazilian Market?” ABN AMRO Asset Management, July 2005

A study of Russian firms showed that a worst-to-best improvement in corporate governance predicted an astronomical 700-fold (70,000%) increase in firm value

Black, Bernard. “The Corporate Governance Behavior and Market Value of Russian Firms.” Emerging Markets Review, vol. 2, March 2001


Beyond the corporate governance theory

Governance Integrity Solutions (UK) Ltd. (GIS) are leading providers of corporate governance consultancy and management solutions. Our flagship offering is a unique and powerful online toolset branded as InForm.  Our user-friendly products are designed to dramatically improve governance conformance in companies, the pension funds, public entities and Nonprofit organisations.

InForm represents a quantum leap in respect of corporate governance implementation and management with a unique combination of an internal Board and management tool with an external benchmarking ability. Our products go beyond the familiar systems and controls and are designed to assess and benchmark the strength of an organization’s culture in respect of self-regulation and accountability.

Governance Improves Financial Performance

Recent research re-affirms a direct correlation between good corporate governance and financial performance. In the most celebrated “governance-ranking” study to date (Gompers et al (2004), the  findings provide clear support for the proposition that there is a link between the quality of corporate governance, measured in terms of shareholder rights, and financial performance.

Corporate governance drives profits

Companies that invest in corporate governance will reap rewards in performance and profits, according to research by the Association of British Insurers, ABI.

UK firms with good corporate governance produce 18% higher returns than those with poor governance records and share volatility was found to be 9% lower. Conversely, a breach of governance best practice reduced a company’s return on assets equating to 8.6% fall a year.

“The results confirm our belief that good governance produces better returns with less volatility, something that long-term savers need,” said ABI director of investment affairs Peter Montagnon. Shareholders investing £100 ($198) with good governance could expect returns of £120 ($238) compared to poorly governed firms which would produce just £102 ($202).

The research was based on 654 FTSE All-Share companies from 2003 to 2007.

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