Question

What are the similarities and the differences between the two major models of corporate governance

What some of the more important recent trends in financial markets and how do these affect market efficiency

Explain the importance of the financial ratios in making investment decisions and in running a corporation

PLEASE ANSWER ALL OF THEM IF POSSIBLE

Answer 1

A) Let's talk about the two major corporate goverance model we have one is the "Angl-US model and another one is the German Model.

Let us first talk about the differences in both of these models , the "Anglo-US model of coperate governance is a model which gives more power to the shareholders. The share holders have all the rights to elect the members of the baord of directors as well as the management. Where as in the german model or the european model the stakeholder such as emlpoyees also have the right to choose the executive board.

Thus in anglo-US model manager or management has to derive authority from shareholders before making any decision where in in european model the operations is carried out by two boards i.e supervisory board and executive baord.The executive baord takes care of corporate management and supervisory council or board controls the executive baord. The members of the supervisory council is nominated by the shareholders and employees. That is why German model is also called as two tier model.

The Anglo US model is more prevelant in the US and Cannada and when it comes to german model it's more prevelant in European countries and in some Asian countries. But what's similar in both these models are that the shareholders have a firm control over the corporate governance even though in difference ways. Anglo-US model has direct control over it's board of directors and management where as in European Model the shareholders appoints the body of supervisory board which controls the mangement. So the biggest similarity is the way the control afixed to the shareholders and the difference would be how they function and also the different countries they funnction in.

B) let's now talk about few trends in the financial market , I would listing out few trends in the market today and how it will effect market effiency :

1. Artificial Intelligence and it's use to ehance prcing decision in bond and security market : Due to liquidity issues valuation in bond and securities market is a challenge. It requires huge pool of information and also effected by regulatory and different market rates but AI can have a solution to that.
2. Blockchain and its use to increase data transparency in the capital market : The decentralized structure of the blockchain technology will take care of inflow of information and strengthen the capital market when it comes to trust.
3. Digital Securities : As due to the pandemic and other financial factors rasing capital is becoming more and more dificult for corporates and businesses, digital securities can be a game changer. Currently the financial markets are volatile and inefficient and digital securities can automate the process, and would a cost effective and secure means of doing trading.
4. Robotic process automation and to simplify client onbaording : Manual means of client onbaording in financial market is an expensive affair and will help business process to best possible customer experiences .
5. Quantamental Investment : This involves both quatitative and fundamental means of investing which will result very precise decision making process when it comes to making investment decisions.
6. Common Domain Model : It aims to standartize the derivative market and remove any challenges and help process data more efficiently and accurately.
7. Capital market is set to transition away from london interbank offer rate.
8. Machine learning to boost automation in capital market.

These are the few trends in financial market and that surely will make the market more efficient , more secure and more informative.

C) Now let us discuss about the importance of financial ratios and how its effects your investment decisions and running of business as well.

• It's the most standardize approach to ascertain and compare companies and industries as a whole. Fiancial ratios can help you know the performance of the company in terms of sales, it's volume of operations and its market share e.g. Liquidity Ratio helps you to know how much cash a company has. It helps you understand how good a company within an industry is doing interms of profit or earnings e.g. ROE and ROA of a company can help us understand how a company is running effciently.
• So through financial ratios you can do a industrial analysis and set benchmarks for each industries and help in making better investment. Through financial ratios you can know the performance of each company and make your investment decision as per the performance e.g. If ROA and ROE is high for a company, it's a better option to invest in it. Similary if a industry as 0.85 as debt equity ratio but a company has 1.3 that signifies is highly leveraged that means depending on outside funds.
• Again it helps to know the market or stock valuation of the company. By looking into the financial ratios over the years or quarter one can know the strength and weakness of a companies equity or market value and its growtha and as per the analysis if the ratios shows growth or profit , then one must invest in such company.
• Similarly these ratios can help the internal management and guide them to make new plans as per the performance and make changes in organizational structure and strategies to make the performance better. It will help the management to remove the weakness and take care of the oppurtunities. Ratios like Asset management ratios, debt management ratios and liquidity ratios help the management in ascertaining thier performance and take action.