NSE Launches Corporate Governance Index

The Nigerian Stock Exchange (NSE) has launched a Corporate Governance Index (CG Index), which will track the performance of prequalified companies, using their market capitalisation, free float and corporate governance rating scores.

The CG Index will be reviewed on a bi-annual basis at which point other companies that have met the requirements may be added to the Index or companies that have had their ratings suspended or withdrawn may be removed.

The Index is expected to be an important tool for investors keen on investing in well governed companies as well as corporates eager to distinguish themselves on the ground of governance.

Chief Executive Officer, Nigerian Stock Exchange (NSE), Mr. Oscar Onyema, said the new index will increase transparency in the capital market and provide investors additional data points to make well-informed investment decisions.

“The launch of the CG Index is an important milestone to strengthening listed companies by tracking their corporate governance practices. This index will increase transparency in our market and provide investors additional data points upon which to make sound decisions.

“I congratulate the companies that have successfully completed the process and I expect that they will be more positively looked at whilst trying to raise and access capital within or outside of our jurisdiction,” Onyema said.

He pointed out that sound corporate governance practices will lead to higher economic performance, provide more sources for capital investment and increase the creditability of shareholders.

“The NSE CG Index is highly correlated with other NSE Indices. By far, the highest correlation coefficient was recorded with NSE 30 Index at 99.6 per cent and closely followed by the NSE All Share Index (ASI) at 99.3 per cent. In essence, all indices moved in tandem in nearly all cases. The observed correlation between the CG Index and ASI reinforces observed trend in some emerging markets, including Brazil, China and Italy. It can, therefore, be inferred that companies that determine the direction of the ASI in these markets are mostly companies with good corporate governance practices,” Onyema said.

Source: The nation


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