Strong Corporate Governance Practices Linked to Strong Quality of Earnings and Financial Transparency, Study Finds

There is a strong correlation between the quality of a company's financial filings and its corporate governance practices, according to a study released today by RateFinancials Inc., a New York-based independent risk research firm that rates the financial reporting of publicly held companies.


RateFinancials analysts have spent the past two years rating S&P 500 companies on the basis of three major categories: quality of earnings, transparency and corporate governance. The firm's research demonstrates a clear positive correlation between companies with strong corporate governance practices and those with good quality of earnings and financial transparency. In fact, RateFinancials found that the top 20 percent of the companies that it has rated earned an average corporate governance score that was 87 percent higher than the average governance score for the bottom 20 percent of companies that it had rated. Overall scores are strongly weighted by earnings quality and financial transparency.

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