more-arw search

Markets Will Recognize Good Corporate Governance

Consumer and investor opinions can be improved with voluntary corporate govern

Researchers at Lausanne, Switzerland-based business school IMD have found that despite beliefs that the costs of corporate governance are too much for a business to take on, the voluntary effort is actually

Researchers at Lausanne, Switzerland-based business school IMD have found that despite beliefs that the costs of corporate governance are too much for a business to take on, the voluntary effort is actually rewarded with increased market performance.

According to the study findings, when a corporation moves to improve its oversight of internal operations - especially if they make the business more transparent and work to prevent another financial crisis - it's positively reflected in the market prices.

Professor Arturo Bris, an author on the study, noted that much of the intense regulatory efforts represent an effort to "avoid the failures of the past."

Bris said that while it's taken for granted that "good governance has to be imposed or recommended from the outside because the costs are greater than the benefits. Our study demonstrates this isn't necessarily the case - in fact, the voluntary adoption is rewarded almost immediately by the markets."

As The Tennessean points out, one of the ways that corporations have improved their governance is by being transparent with stockholders, adding context to the content of quarterly statements. Overhauling the director selection process to include investors has also brought positive change in many cases, the source notes.

Topics: