Corporate Governance And Its Impact On Business Governance

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Corporate governance is an increasingly important topic in this age of globalisation, it is a global occurrence which in turn makes the subject complex, with issues of ownership, cultural, legal and other structural differences being involved. From this broad scope, it is discernible that the functions of the board are inseparable from the topic of corporate governance and in turn what effect these have and will potentially have on the share price in the future. As with every other aspect of globalisation, its development is not necessarily even across all spheres; “thus some theories may be more appropriate and relevant to some countries than others...” (Mallin 2010, p. 13). In making any assertions on the impact of corporate…show more content…
In recent times, the assumption that shareholders will be willing to pay a premium for such shares that are identified as having favourable governance scores is sounding more reasonable due to growing research and reports on the effect of corporate governance on equity value. “Their results clearly support the hypothesis that well-governed companies outperform their poorly governed counterparts. Well-governed companies have higher equity returns, are valued higher and their accounting statements show a better operating performance” (Bauer, Gunster & Otten 2003, p.2) There have been surveys into different companies in the United States and across Europe with the aim of comparing the performance of poorly managed firm against well run ones, the relationship between varying governance standards and the return on shares across FTSE Eurotop 300 showed that across the EU, there was a more visible relationship between governance and firm value, this was attributed to the relatively poorer governance standards available in the which meant that excess returns to corporate governance were much smaller when compared to the UK where corporate governance standards are generally higher.( Bauer, Gunster & Otten ibid p.15) Similarly, further research to establish an empirical relationship between corporate governance and share value looked into
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