Little is known about the relation between the actual governance rating received by a firm and
the firm’s performance. In this study, we examine the relation between the actual corporate governance
rating received by a firm and the firm’s performance during the years 2002–2004. We use the
institutional shareholder services (ISS) corporate governance quotient (CGQ) rating of a firm’s corporate
governance structure and analyze this rating in relation to the firm’s operating performance. We
compare the institutional shareholder services’ CGQ rating to two measures of the firm’s operating
performance, return on assets (ROA) and return on equity (ROE). Based upon our results, we do not
find statistical evidence suggesting that the firms’ operating performance is related to the firms’ ISS
corporate governance rating.
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