The Impact of Corporate Governance on Stock Market Performance
Impact of Corporate Governance on Stock Market Performance
Farah Rezwan
Reyan Zeenat Hai
Nogmaye Habiba
Abstract
The paper aims to establish a relationship between Corporate Governance and stock market performance. In doing so, several variables had been identified by a thorough review of literature. These variables were measured on the basis of their performance, in respect to developed and developing countries, in relation to Corporate Governance. The performance measures were done by using data and graphical representations. The analysis recognized a significant relationship between corporate governance and stock market performance.
Keywords: Market Efficiency, Market Valuation
Introduction:
A country’s economic condition depends largely on the performance of the financial market. A strong financial market is the backbone for the economic development of the country. Financial markets have significantly developed in the last decades throughout industrialized countries. Governments throughout the world have become aware of the importance of corporate governance for the efficient performance of the stock market. In the last few years’ corporate governance has become an important issue throughout the world. A market that has sound corporate governance proves to be very efficient. An efficient market in turn attracts more investment and increased transaction thus increasing market capitalization and liquidity.
Although economies are becoming increasingly global, firms with international operations are still subject to the principles and practice of national corporate governance. It has been rightfully seen that a firm’s valuation does not only depend on the profitability or the growth prospects embedded in its business model, but also on the effectiveness of control mechanisms, which ensure that investors’ funds are not wasted in value decreasing projects. Investors’ however are encouraged to invest in sound, orderly and transparent markets where
Farah Rezwan
Reyan Zeenat Hai
Nogmaye Habiba
Abstract
The paper aims to establish a relationship between Corporate Governance and stock market performance. In doing so, several variables had been identified by a thorough review of literature. These variables were measured on the basis of their performance, in respect to developed and developing countries, in relation to Corporate Governance. The performance measures were done by using data and graphical representations. The analysis recognized a significant relationship between corporate governance and stock market performance.
Keywords: Market Efficiency, Market Valuation
Introduction:
A country’s economic condition depends largely on the performance of the financial market. A strong financial market is the backbone for the economic development of the country. Financial markets have significantly developed in the last decades throughout industrialized countries. Governments throughout the world have become aware of the importance of corporate governance for the efficient performance of the stock market. In the last few years’ corporate governance has become an important issue throughout the world. A market that has sound corporate governance proves to be very efficient. An efficient market in turn attracts more investment and increased transaction thus increasing market capitalization and liquidity.
Although economies are becoming increasingly global, firms with international operations are still subject to the principles and practice of national corporate governance. It has been rightfully seen that a firm’s valuation does not only depend on the profitability or the growth prospects embedded in its business model, but also on the effectiveness of control mechanisms, which ensure that investors’ funds are not wasted in value decreasing projects. Investors’ however are encouraged to invest in sound, orderly and transparent markets where
References: 7. World Bank, Factbook, 1998.