Studies indicate corporate governance 'controversy'

A lack of convincing evidence regarding the financial advantages of good corporate governance should ensure the issue remains controversial among business experts for some time.

This is according to the Economist, which notes that detractors of governance who fear excessive red tape have frequently pointed to the lack of "conclusive" data in this area.

Although several studies have been conducted, such as the 2003 analysis by economists Paul Gompers, Joy Ishii and Andrew Metrick, they have often failed to convince the doubters.

However, the publication suggests a new report from governance research organisation the Corporate Library could turn the tide.

This study indicates that investors would have enjoyed significantly higher returns during 2003 to 2010 from a portfolio that excluded companies deemed to be a "high" or "very high" risk in terms of governance.

The researchers analysed firms for specific governance problems and applied a ratings system to determine the risk.

Head of the Global Corporate Governance Forum Phil Armstrong recently told a conference in Cape Town that emerging economies will have a greater influence over global governance standards in the coming years, according to South African publication Business Report.