Fitch formalises corporate governance’s impact on credit risk

Fitch Ratings has formalised and released its framework for reviewing corporate governance. The rating agency characterises governance’s impact on credit ratings as an important element in the assessment of a company’s credit quality.

The framework seeks to address factors such as the independence and effectiveness of board directors and the reasonableness of executive compensation in a more methodical manner.

Two main strands of analysis underpin Fitch’s methodology: systematic treatment of publicly available governance data and information, and assessment of the more qualitative attributes of practices.

“There is a benefit to performing both systematic data analysis and contextual reviews of a company's governance practices,” said Robert Grossman, chief credit officer at Fitch in New York.