Adaptive conjoint analysis: a new approach to defining corporate governance

Manuscript Type: Empirical Research Question/Issue: The method introduced to the corporate governance literature by this paper captures the construct of corporate governance in a small number of attributes, using responses made by directors and shareholders to an adaptive conjoint analysis questionnaire. Research Findings/Insights: We demonstrate how to identify the key attributes of corporate governance from directors' and shareholders' relative preferences among a set of corporate governance attributes. The dominance of CEO duality as a relatively more important attribute is a key finding. Theoretical/Academic Implications: Adaptive conjoint analysis is a useful technique for research into governance issues characterized by constrained choice. For future researchers seeking to capture governance in a limited number of measures, we have identified four attributes considered by directors and shareholders to comprise effective corporate governance, with the single measure of CEO duality being the most important. Practitioner/Policy Implications: This parsimonious set of attributes can guide the design of future corporate governance regulations, to avoid costly over-regulation. We do not suggest that restrictions on multiple directorships or an appropriate board size should be added to current requirements, and the surprisingly low perceptions of audit partner tenure and audit committee size as important to good corporate governance suggest that these attributes could be excluded from future regulations.