Question

1. Discuss possible effects of good corporate governance.

2. What is the effect of information asymmetry in corporate governance? Discuss how to reduce information asymmetry between shareholders and managers.

Answer 1

1. Corporate Governance is the internal structure of a corporation from it's lower level workers all the way up to it's executives.

Effective Corporate Governance can have a positive effect on the shareholders by that the companies is making well organised decisions and is well managed internally.This can lead to a increased market confidence in the company which will help its shares to rise blossomly.

Corporate Governance can have a positive effect on business growth which make its easier for the business to extend and develop it's new territories

Corporate Governance helps in raising capital because it creates a confidence among investor that they are applying in a well defined growth making company.

A company with a good corporate Governance strategies related to spending, equitable treatment of its employees and doing social well being creates a Goodwill of the company making it easier to expand its business.

2. It has been observed that information assymetric in corporate governance has negative effect on shareholders and it also results in negative abnormal performance of company.

A lack of poor corporate governance at the management and business level lead to poor business decision which can lower the value of the company and make it difficult for the company to meet its financial obligations.

A company with lack of corporate governance strategies related to it's employee and the environment degrades its value in the market and the reputation of the company hampers.

To reduce the information assymetry between shareholders and managers there should be a strong and effecient communication channel between them. The grapevine gossipers should be eliminated.

There should be a straight forward and sustainable action plan for solving the problem.

They both are working for the welfare of the organization so we is always better than I . They should work together to achieve the objects rather than playing blame game.