Corporate Gevernance

Running Head : Corporate Governance

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Introduction

Corporate Governance refers to the way in which a company 's top managers carry out their responsibilities as well as authority and most importantly how they account for this authority in relation to the company 's stakeholders (those who have entrusted them with the organisations resources and assets . Corporate governance is in particular concerned with the possible abuse of power and the need for integrity , accountability and openness in the decision making processes and practices of

the firm . The case of the fraud that has been taking place at Satyam , is a good illustration of the significance of good corporate governance and the possible consequences of its failure

According to Leahy (2009a , study shows that companies which score highly (more than 50 points out of 100 ) in rankings used to measure corporate governance have a very stable gross profit and enjoy higher net worth returns as compared to those organisations which score less in these rankings . This article shows that investors tend to reward Indian companies whose corporate governance was above average with better market valuations . The study which was conducted by Standard Poor 's found that an upward movement even by a single unit in an organisation 's corporate governance ranking directly yielded an improvement in the company 's market valuation (Leahy , 2009a . Admission to fraud by the former chairman of Satyam Computer Systems will have detrimental effects on the market valuation of this company as it implies low...