Global indicator of adherence to the best practices of corporate governance: Mexican stock market corporations

Abstract

This article offers indicators of adherence to Corporate Governance (CG) in México useful to monitor compliance with common regulations at the Mexican Stock Market Corporations (MSMC). We use Exploratory Factor Analysis to obtain indicators that reflect different dimensions of CG. The sample comes from the answers provided by the MSMC to the questionnaire of adherence to the Code of Best Corporate Practices in the period 2010-2016. Thirteen composite orthogonal factors that measure the quality and degree of adherence of companies and sectors to CG best practices are extracted. These factors show the relative position of each company, as well as its temporal dynamics. The proposed indicators allow the analyst to determine the degree of compliance of CG in different dimensions: strategic management, risk management, audits, operations with related parties, board of directors, among other corporate practices and functions, among others. There are no performance indicators of compliance with the CG practices that are systematically used in the literature or in the practice of CG in Mexico. The global indicator of adherence to the best Corporate Governance practices (ADHECORP) and the thirteen composite indicators proposed in this article cover this practical gap and allow to enhance research on various CG issues in Mexico.