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Corporate Governance. Market and Regulations. Framework of Corporate Governance. Framework of Corporate Governance. Corporate Governance. External CG A. Legal mechanisms B. Market mechanisms Internal CG. Corporate Governance. A. Legal Mechanisms Investor Rights Board Responsibilities
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Corporate Governance Market and Regulations
Corporate Governance • External CG • A. Legal mechanisms • B. Market mechanisms • Internal CG
Corporate Governance • A. Legal Mechanisms • Investor Rights • Board Responsibilities • Disclosure Rules • Enforcement of laws
Corporate Governance • B. Market Mechanisms • Capital Market • Product Market • Labor Market
Corporate Governance • B. Market Mechanisms • Capital Market: • Pressures of Capital Markets will Improve Governance of Corporations • Improvements in Corporate Governance will Promote Development of Capital Markets
Market Efficiency • Market-based governance system • Are markets efficient? • Anomalies
Transparency • Timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, ownership, and governance of the company (OECD Principles) • Information asymmetry
Transparency • Reducing information asymmetry • Role of financial disclosure and external audit in corporate governance
The Lemons Problem • Can lead to the breakdown in the functioning of the capital market • Investors can’t differentiate between good ideas and bad ideas. • Value all ideas as average. • Corporate disclosures and external audits play an important role in mitigating this problem