NEW YORK--()--GMI Ratings, the leading provider of research on environmental, social, governance (ESG) and accounting-related risks affecting the performance of public companies, released today the latest monthly results in a rolling 10-year study comparing the equity performance of North American companies with top-decile and bottom-decile Accounting and Governance Risk (AGR®) ratings. The study found that, for the 10-year period ended August 31, 2012, companies with top-decile AGR ratings would have outperformed lowest-decile companies by 54%.
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AGR is GMI Ratings’ proprietary risk metric reflecting a broad spectrum of accounting irregularities and weaknesses in corporate governance statistically associated with an elevated risk of anomalous events likely to cause precipitous contractions in equity value.
This study focuses on the performance of best-rated and worst-rated companies drawn from the 7,473 North American companies with AGR ratings. In order to simulate a practical investment strategy, the study excludes very small companies (lowest 40% by market capitalization) whose securities typically offer little liquidity.
GMI Ratings’ chief executive James A. Kaplan said: “The results of our rolling 10-year study continue to demonstrate that AGR ratings can help investors significantly improve equity returns. Investment managers as well as insurers use AGR ratings to gauge the risk of high-impact Black Swan events. Traditional research methods often underestimate and misprice these risks, and senior decision-makers are increasingly exploring novel approaches to risk modeling attuned to the changing character of capital markets. Our research clearly suggests that, in addition to environmental, social and governance variables, investors and insurers can achieve significant incremental performance improvements by incorporating forensic-accounting risk metrics, which weigh heavily in the AGR model.”
About GMI Ratings
GMI Ratings is an independent provider of research and ratings on environmental, social, governance and accounting‐related risks affecting the performance of public companies. The firm’s ESG ratings for nearly 5,500 companies worldwide incorporate 120 ESG KeyMetrics™ to help investors assess the sustainable investment value of corporations. The firm also provides Accounting and Governance Risk (AGR®) ratings and corresponding litigation probabilities for approximately 18,000 public companies worldwide. AGR metrics reflect the accuracy and reliability of a company’s financial reporting. Clients of GMI Ratings include leading investment managers, asset owners, insurers, auditors, regulators and corporations seeking to incorporate accounting and ESG factors into risk assessment and decision‐making. A signatory to the Principles for Responsible Investment (PRI), GMI Ratings was formed in 2010 through the merger of GovernanceMetrics International, The Corporate Library and Audit Integrity. In the 2012 Independent Research in Responsible Investment (IRRI) Survey conducted by Thomson Reuters Extel and SRI‐CONNECT.com, GMI Ratings was named “The Best Independent Corporate Governance Research Provider”. For more information please visit www.gmiratings.com.