The ignored tool of corporate governance rating: An overview of the corporate world in the emerging market

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Abstract

Generally, the interest of stakeholders is to see the growth of their entities, also they benchmark their entities through business performance metrics or tools like return on equity, return on assets (Mishra & Kapil, 2018), earnings per share, gross profit margin, employee productivity, sales turnover, ratings given by prominent credit rating agencies, such as Investment Information and Credit Rating Agency (ICRA), Credit Rating Information Services of India Limited (CRISIL), Standard and Poor, etc. In addition to this, internal governance mechanisms, board of directors’ characteristics, their independence, transparency, concentration, and presence of employees in the ownership structure also influence financial and stock market performance (Braendle, Stiglbauer, Ababneh, & Dedousis, 2020). However, assessing the performance of entities through some of these limited angles is not always possible. One more criterion for assessing the performance of entities is corporate governance rating (CGR). However, it is not widely used as a tool to assess a firm’s performance in emerging markets. The present research paper is intended to address the scenario of corporate governance rating in Indian corporate world to assess a firm’s performance. With the help of majorly secondary sources of data, this study was conducted from 2003 to 2021 based on the CRISIL’s rating pattern. The results revealed that only 20 companies adopted the process of corporate governance rating. The findings showed the significance of corporate governance rating, its adoption and future research in the development of the rating mechanisms in India as well as in other emerging markets.

Keywords: Corporate Governance, Stakeholders, Benchmarking, Metrics, Rating

Authors’ individual contribution: Conceptualization — A.L.R.; Methodology — G.R.; Validation — G.R.; Formal Analysis — A.L.R.; Investigation — A.L.R.; Resources — N.K.; Data Curation — G.R.; Writing — Original Draft — A.L.R.; Visualization — A.L.R.; Supervision — A.L.R.; Project Administration — P.C.B.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

Acknowledgements: The authors extend their gratitude to all the experts and officials of various companies for extending their support in the completion of this work.

JEL Classification: G38, M42, M48

Received: 27.07.2021
Accepted: 06.01.2022
Published online: 10.01.2022

How to cite this paper: Rao, A. L., Kulshrestha, N., Ramakrishnan, G., & Bahuguna, P. C. (2022). The ignored tool of corporate governance rating: An overview of the corporate world in the emerging market. Journal of Governance & Regulation, 11(1), 38–44. https://doi.org/10.22495/jgrv11i1art4