CG studies have utilised disaggrefated CG variables to measure CG practices in a firm. Does using a composite CG variable make a difference? Is it worthwhile studying what individual CG aspects should be used in building the composite CG variable? Let me know your thoughts colleagues.
Composite CG variables could be useful when there is a need to test two or more CG variables impact on the Dependent Variable, but most theoretical frameworks usually supports the relationship between 1 CG variable to another variable, hence an opportunity for novelty within the theoretical framework. My 2 cents. Would like to hear your further thoughts as well.
the aggregate corporate governance (CG) variable make a difference in Agency problem is professional ethics. It is the major element that supports internal or external governance mechanisms; and his body of governance ; if hasnot a professional ethics no benefits from corporate mechanisms (bod; Internal Audit, Audit Committee, External Audit, Shareholders Meeting, Regulatory Agencies)
Efectivamente, como comenta Dayana Mastura, es una oportunidad para innovar dentro del marco teórico, pero viendo algunas investigaciones que lo han aplicado, como efecto en el resultado y debido a la susceptibilidad de los distintos componentes de la variable, a la hora de interpretar los resultados puede plantear algunos problemas, produciendo un efecto positivo sobre los componentes de menor importancia y negativo los de mayor importancia.
Yes, absolutely yes. It depends on the characteristics of the elements of corporate governance that the researcher / modeller employ as variables. Most often, several researchers are not able to select and adopt elements of corporate governance that fits well to the organization(s) evaluated. I will a simple example, in my assessment of the impact or effect of Public Finance Management Agencies (Fiscal Institutions) and Government Financial Performance in Nigeria, we invoked: Fiscal Budget Implementation Timing, Timeliness of Government Auditing; Audit Quality Assurance, Transparency in Government Financial Reporting as proxy for openness / access of the public to the treasury accounts as variables.
The use of aggregates or whole depends on what a scholar is looking at. Overall, a careful selection of variables should be of essence in any research study.
the litterateur is lacking a theory that guide the researcher to aggregate construct Governance index. However, there is important point in CG literature which I believed is ignored . The CG element could be either complement each other (in in which one element would not be effective until the present of other ) or substitute with each other . In the former case using CG index might be an accurate measure and justifiable when all scores are aggregated . However in the case of the substitution, aggregate score would not be an accurate measure , and the score would not be reflect the actual Governance in the firms , hence using Individual CG element would be better , There is Studies proved these two cases empirically in the literature.
I see the individual CG element such as board independent being measured by the proportion of the board members in the board would not be an accurate measure for what we mean by independence .Therefor, I believe construct a broad measure that can capture the independence of the board members would be better that just using the Individual CG elements .
Also, the selection of the governance elements should be drive from the local governance arrangements that used in the firms of your study , such as using local governance code , local companies acts or listings rules .
SO, Using a CG INDEX that focus on anti takeover defences would not be relevant for a firms in a country that its capital market not active and has a high concentrated ownership.
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