Shareholder Rights Index
factor.formula
The index is constructed by analyzing each company's articles of association to see if they contain clauses that restrict shareholder rights. Each time a clause that restricts shareholder rights is found, the index value increases by 1. Therefore, the higher the index value, the more restrictions there are on shareholder rights in the company's articles of association, and the weaker the shareholder rights.
factor.explanation
The value of the shareholder rights index reflects the degree to which shareholders' rights are protected in the corporate governance structure. The lower the index value, the fewer clauses in the company's articles of association that restrict shareholders' rights, and shareholders are better able to exercise their voting rights, participate in corporate decision-making, and safeguard their own interests. Companies with stronger shareholder rights are generally considered to have a more sound governance structure, which is often associated with higher corporate value, higher profitability, faster sales growth, more prudent capital expenditures, and fewer non-strategic acquisitions. Conversely, a higher index value means that shareholders' rights are more restricted and management has greater power, which may lead to lower corporate value and efficiency.