A Framework for a Nordic Corporate Governance Index

Abstract

The same metrics may not be appropriate for assessing the quality of corporate governance in different institutional environments and for different structures of corporate ownership. For example, it has been argued that the quality of corporate governance models in the Nordic region, with relatively high levels of concentrated ownership but with reportedly low levels of private benefits of control, is not fully reflected in established corporate governance indices that apply uniform metrics to different corporate governance systems. This paper argues that many established corporate governance indices use metrics that are less relevant in the context of concentrated ownership. This results in inaccurate comparisons of country-level corporate governance regulation. Corporate governance mechanisms should be analyzed and rated in the context of the relevant corporate environment, recognizing functionally equivalent mechanisms. The study identifies relevant attributes for regulation in concentrated ownership environments that can be used to develop more accurate corporate governance indices.