DBRS Publishes Criteria for Evaluating Corporate Governance
DBRS views corporate governance as an important component of its credit rating analysis. This criteria published today is an overview of the framework DBRS uses to ensure that the rating process gives due consideration to key areas in evaluating how a company is governed. In general, the DBRS evaluation homes in on the review of certain key underlying motivations and processes to ensure that they are effective and honest. In most cases, entities will get a pass on governance. However, if a company gets a fail, the rating could be seriously affected.
“When an entity exhibits weakness in a governance issue,” says Kent Wideman, Chief Credit Officer, “it may affect the rating by raising questions with respect to certain areas, such as the accuracy and reliability of its financial statements.” Some entities may also face a wide range of regulatory penalties that could affect both financial results and the ability to continue and/or expand a business. Concerns in one aspect of governance would cause DBRS to delve deeper into that area and most likely into other governance areas as well.
The methodology providing DBRS's processes and criteria is available by contacting us at info@dbrs.com.