Purpose The purpose of this paper is to explore the ability of commercial governance ratings (CGR) to predict firm performance. Design/methodology/approach Based on the review of the corporate governance literature, the authors pose five hypotheses on the relationship between CGR and firm performance. Then, the authors test these hypotheses for the latest version of the Institutional Shareholder Services Inc. (ISS) index (Quickscore) with a sample of firms formed by the constituents of the Standard and Poor’s Europe 350 stock market index. Findings The authors have not found a consistent significant relationship between Quickscore ratings and firm performance. This main result holds across a variety of checks. Research limitations/implications Some of the additional analyses are conducted with rather small samples. The results of these analyses have to be carefully taken. Recommendations for further research are offered. Practical implications The results call into question the usefulness of CGR, marketed by influential consultant companies, and which are becoming increasingly popular among investors, as reliable predictors of firm performance. Originality/value Despite an increasing body of research on the use of CGR as predictors of firm performance, the available research is heavily concentrated in the US market. No previous study has explored this relationship using the recently developed ISS index Quickscore in a cross-European setting. The use of a cross-country sample of companies allows the authors to address the impact of institutional factors on the CGR-firm performance relationship. Moreover, the authors do not limit the study to the overall scores of the index but examine also the partial scores (pillars) which intend to assess specific dimensions of governance. This makes the evaluation of the relationship more complex and challenging.

In this paper, we empirically examine whether higher levels of compliance with the recommendations included in the Spanish Unified Good Governance Code (UGGC) have an impact on firm performance using a unique hand‐collected panel data set of 145 listed companies for the research period between 2007 and 2012. We find that, in spite of the increasing compliance trend, there is no conclusive evidence that adherence to the UGGC guidelines is a performance relevant factor. This result seems to be robust, as it holds in the main analysis as well as in all the additional analyses conducted. Therefore, our findings would further support the lack of consensus in this line of research regarding the true impact of compliance with the globally disseminated codes of best corporate governance practices on firm performance. The generally inconclusive findings should suggest to shareholders and stock analysts that high scores on these measures do not necessarily translate into higher performance, despite the notion that “good governance” ought to be beneficial.