Nobody downloaded yet

Corporate Finance and Governance - Essay Example

Comments (0) Cite this document
Summary
This paper 'Corporate Finance & Governance" focuses on the fact that critics of American business claim that U.S. managers rely too heavily on a few financial techniques to weigh major investment decisions. Calculation of discounted cash flows says critics are biased against long-term investments.   …
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER96.9% of users find it useful
Corporate Finance and Governance
Read TextPreview

Extract of sample
"Corporate Finance and Governance"

Download file to see previous pages "It has long been recognised that the recognition of risk is an important component in capital budgeting decisions. The future is uncertain and investment appraisal techniques that fail to recognise this fact will almost certainly lead to incorrect conclusions and erroneous recommendations." (Brookfield, 1995)
"In a longitudinal survey of capital budgeting practices of large UK companies between 1975 and 1992, substantial increase in the usage of discounted cash flow (DCF) and risk appraisal techniques were reported. Despite the increased usage of the more theoretically sound discounting techniques, several writers in both the UK and US have claimed that companies are underinvesting because they misapply or misinterpret DCF techniques. It has been asserted by several writers that firms are guilty of rejecting worthwhile investments because of the improper treatment of inflation in the financial appraisal. Many firms are understating NPVs and IRRs because of the incorrect treatment of inflation and the use of excessively high discount rates. Concern has also been expressed by various commentators that many companies are failing to invest in advanced manufacturing technologies (AMT) as fully as they should. Financial appraisal techniques have been cited as a major reason for the under-investment in new manufacturing technology. DCF procedures should not be ignored or relegated in importance merely because they might be used incorrectly. Instead, decision-makers should recognize potential problems and be careful to ensure that the financial appraisal is performed correctly." (Colin and Mike, 1986)
"In a world in which information is not costlessly and symmetrically available to all economic agents, corporate project choices do not abide by the golden rule that all positive NPV projects should be accepted. In a sense, this is somewhat unsettling because it is difficult to prescribe simple rules for managers, and there has been little normative research into optimal capital allocation policies in different types of informationally constrained environments. However, the contemporary research highlights the pitfalls of policy-oriented discussions about corporate investment behaviour and managerial compensation packages that rely on the prescriptions of the traditional, symmetric-information paradigm of capital budgeting and financing. The research done to date indicates that many interesting things can happen under asymmetric information, none of which may be irrational, but some of which could be deleterious to the shareholders' welfare." (Thakur, 1993)
Given these observations about investment appraisal techniques and DCF techniques, in particular, this report aims to assess the feasibility of using traditional investment appraisal techniques, while incorporating real-time variables such as risk and uncertainties. In particular, the report focuses on NPV as a basis for capital budgeting and evaluates how the concepts of risk-adjusted discount rates and sensitivity analysis can bolster traditional NPV estimation and thus provide business managers with realistic and flexible options when it comes to assessing the suitability and profitability of a particular investment or project. Accordingly, the management approach should not be limited to using a fixed number of investment appraisal techniques; rather they should be more flexible while appraising the gains from a particular investment.    ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Corporate Finance and Governance Essay Example | Topics and Well Written Essays - 2500 words”, n.d.)
Retrieved from https://studentshare.org/business/1514409-corporate-finance-and-governance
(Corporate Finance and Governance Essay Example | Topics and Well Written Essays - 2500 Words)
https://studentshare.org/business/1514409-corporate-finance-and-governance.
“Corporate Finance and Governance Essay Example | Topics and Well Written Essays - 2500 Words”, n.d. https://studentshare.org/business/1514409-corporate-finance-and-governance.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
Corporate Governance
...Task Corporate Governance Introduction For quite some time, businesses or firms have been practicing merging or simply acquiring other businesses. This is achieved by having the acquiring company maintain its name while the other company’s name is eliminated. Likewise, the two companies have to set rules of engagement that will ensure that they both operate in a manner that serves both of them well without any unfairness. The rules may be touching on both the firms themselves or their customers. This may be because of taking over of one company by another, buying out of one company by another or simply taking over another company. This is done with the main of financial gains or even avoiding making...
4 Pages(1000 words)Essay
Corporate Governance and Finance
...?Corporate Governance and Finance Table of Content Overview 3 Company Background 4 Company History 5 Company’s Strategic Direction 5 Company’s Corporate Social Responsibility 6 Comparative Analysis of Company’s position in view of Economic Change (Fiscal Year 2011 vs. 2010) 7 Company Stock Performance 8 Evaluation of Company Share price over the last 8 months 9 Composition of Shareholders and their Performance 13 The Industry Experience of the Company CEO 14 Evaluation of Company’s Position in terms of US Market Practice 15 Assessment of Company’s Corporate Governance and its Effectiveness 16 Conclusion 17 References 19 Appendices 23...
12 Pages(3000 words)Essay
Corporate governance
...? CORPORATE GOVERNANCE …………………. and Number …………….. …………. Words- 759 Corporate Governance The way companies are governed determines their success and the role they may play in the economy as well. Companies in recent years started giving greater emphasis on effective governance with a view to ensure competitive position, attract sufficient capital, guarantee sustainability, and combat corruptions. Corporate governance practices are associated with the development of financial markets, because higher level of governance in most countries are related to larger securities markets and lower...
3 Pages(750 words)Essay
Corporate Governance
...?Corporate Governance Introduction The term corporate governance reflects a set of rules and processes based on which business operation is normally controlled and regulated. Corporate governance can be defined as “the set of processes, customs, policies, laws, and institutions affecting the way a corporation (or company) is directed, administered or controlled” (Solms & Solms, 2008, p.2). An attractive theme of corporate governance is its mechanisms that try to avoid the principal-agent problem. In recent years, especially after the collapse of American corporate giants...
6 Pages(1500 words)Coursework
Corporate Governance
...? Corporate Governance of the of the Corporate Governance Q. Enron, Worldcom and Parmalat have generated immense interest in the study of corporate governance and in identifying how board actions can be monitored more effectively. Discuss one way in which you would improve the current scenario in regard to corporate governance. Introduction The corporate world is full of stories and events- some good and some bad, some which make the news and some which never see the light of day. Competition, personal greed, pressure from stakeholders and other sources are some reasons why business...
6 Pages(1500 words)Coursework
Finance - Corporate Governance
...for the managers where the contracts are not negotiable with large investors but the board of directors of the company who are poorly motivated (Shleifer & Vishny, 1996, p.7-12). 4. Legal Protection The primary reason of investors providing external finance to the companies is to have control rights over the company. External financing can be viewed as a contract between the suppliers of finance and the company as a legal business entity. If there is any violation of the terms and conditions laid down in the contract then the investors can move to the court to exercise their control rights. The nature and type of legal obligations of the managers towards the investors give rise to the...
10 Pages(2500 words)Essay
CORPORATE GOVERNANCE
..., 2009, pp 23-40 C Crawford, Compliance and conviction, Santa Clara, California, 2007 pp 2 D Denis and J McConnell, International Corporate Governance, Journal of Financial and Quantitative Analysis, 2003, pp 36 G Donaldson and J Lorsch, Decision Making at the Top, Basic Books, New York, 1983, pp 57 J Colley et al, What is Corporate Governance? McGraw-Hill, 2004, pp 22 M Jensen, The Modern Industrial Revolution, Journal of Finance, 1993, pp 831 R La Porta et al, Corporate Ownership around the World, The Journal of Finance, 1999 pp 471 T Clarke, Theories of Corporate Governance, Routledge, London, 2004, pp 33 V Sapovadia, Critical Analysis of Accounting Standards Vis-À-Vis Corporate Governance Practice in India, SSRN, 2007, pp 1... ...
10 Pages(2500 words)Essay
Corporate governance
..., the firms are not only motivated by financial benefits but play wider roles in the development of the society as a whole. Various stakeholders ensure that the business is having positive impact on the wider imperatives of social causes like environment, better HR practices, effective CSR practices etc. The analysis of stakeholders also helps the firm to proactively support the community welfare and at the same time, meet the changing preferences of the customers, thereby significantly impacting it productive outcome and improving its image and credibility amongst the stakeholders. Answer 3 The corporate governance gatekeepers are people who are in position to influence the decisions and activities of...
2 Pages(500 words)Essay
PhD Finance - Effects of Corporate Governance
...EFFECTS OF CORPORATE GOVERNANCE By Effects of Corporate Governance Today’s organizations have come up with various policies, processes and structures which create a corporate governance system (Cutting & Kouzmin, 2011, p. 80). Therefore, organizations have formed management bodies, committees of board and reporting process to facilitate an efficient decision making process. In addition, other organization have gone further to focus on the various types of techniques and processes which enable them to not only improve their relationship with the shareholders, but also the quality of their boards and management team. Although some nations...
1 Pages(250 words)Assignment
Behavioral Finance In Corporate Governance Independent Directors And Non-Executive Chairs, And The Importance Of The Devils Advocate
... the agency problems Once way of offering balance is vetting those to be given authority in organizations Appoint people specifically with power to offer criticism to people in authority. Critique of the article people appointed in organizations to criticize the management but fails to state how the critics would be criticized Advocating for vetting of people may be short lived people can devise ways of beating the vetting process. References Morck, R. Behavioral Finance in Corporate Governance - Independent Directors and Non-Executive Chairs. SSRN Electronic Journal. http://dx.doi.org/10.2139/ssrn.527723... Presented by Introduction many employees sacrifice their careers and reputation because of loyalty to their CEO Loyaltyis misused...
2 Pages(500 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Let us find you another Essay on topic Corporate Finance and Governance for FREE!
Contact Us