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Does relative strength in corporate governance improve corporate performance? Empirical evidence using MCDA approach

Guney, Yilmaz; Hernandez-Perdomo, Elvis; Rocco, Claudio M.


Yilmaz Guney

Elvis Hernandez-Perdomo

Claudio M. Rocco


Academics and practitioners have developed different constructs to quantify corporate governance quality. Despite the limitations of the existing measures, they are still being commonly used. The literature finds that the relationship between performance and corporate governance quality can be positive, non-existing or even negative. To resolve this puzzle, we introduce a multi-criteria decision analysis (MCDA) approach to construct an alternative corporate governance quality synthesising companies’ practices and mechanisms through an exhaustive pair comparison procedures based on outranking relationships analysis. Our approach compares the aggregate quality with a well-known corporate governance index, ASSET4 ESG in Thomson Reuters Datastream, using data for the U.S. firms. Using this MCDA approach based on PROMETHEE methods and econometric analysis, we obtain consistently a negative and strong link between firm performance and corporate governance quality. The findings are of particular interest to both scholars and decision makers including providers of corporate governance indices and rating agencies.


Guney, Y., Hernandez-Perdomo, E., & Rocco, C. M. (in press). Does relative strength in corporate governance improve corporate performance? Empirical evidence using MCDA approach. Journal of the Operational Research Society, 1-26.

Journal Article Type Article
Acceptance Date May 10, 2019
Online Publication Date Jun 14, 2019
Deposit Date Jun 20, 2019
Publicly Available Date Oct 27, 2022
Journal Journal of the Operational Research Society
Print ISSN 0160-5682
Electronic ISSN 1476-9360
Publisher Taylor and Francis
Peer Reviewed Peer Reviewed
Pages 1-26
Keywords Multiple criteria analysis; Decision analysis; Corporate governance; Financial performance; , Outranking relationships
Public URL
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Additional Information This is the accepted manuscript of an article published inJournal of the Operational Research Society, 2019. The version of record is available at the DOI link in this record.


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