Title: Convergence in corporate governance: a probit analysis

Authors: Pedro Verga Matos; Nicoletta Rosati; Horácio C. Faustino

Addresses: ISEG – Lisbon School of Economics and Management, Universidade de Lisboa, Rua do Quelhas 6, 1200-781 Lisboa, Portugal; Advance/CSG – Research in Social Sciences and Management, Rua Miguel Lupi, 20, 1249-078 Lisboa, Portugal ' ISEG – Lisbon School of Economics and Management, Universidade de Lisboa, Rua do Quelhas 6, 1200-781 Lisboa, Portugal; Cemapre – Centre for Applied Mathematics and Economics, Rua do Quelhas 6, 1200-781 Lisboa, Portugal ' ISEG – Lisbon School of Economics and Management, Universidade de Lisboa, Rua do Quelhas 6, 1200-781 Lisboa, Portugal; Socius/CSG – Research in Social Sciences and Management, Rua Miguel Lupi, 20, 1249-078 Lisboa, Portugal

Abstract: In this paper the use of ratings as a measure of the quality of corporate governance of firms is explored to investigate the convergence of governance models. To study the evolution of such models in Europe, the proposed approach considers institutional-specific effects to analyse the determinants of the probability of a firm improving its rating, as well as the probabilities of transitioning between different levels of ratings. The methodology is based on binary and ordered choice probit models, and is illustrated using the official Deminor's governance ratings for a sample of 198 European companies belonging to the FTSE Eurofirst 300 index, in 2000 and 2003. Results suggest that there is a tendency for convergence, despite country-specific characteristics, and that the probability of increasing ratings is higher for the Anglo-Saxon model.

Keywords: corporate governance models; convergence; ordered probit; ratings; Europe; quality measures.

DOI: 10.1504/IJEBR.2016.080329

International Journal of Economics and Business Research, 2016 Vol.12 No.3, pp.181 - 203

Received: 22 Mar 2016
Accepted: 27 Jun 2016

Published online: 14 Nov 2016 *

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