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Finance & Accounting
Pages 3 (753 words)
Corporate Governance is nothing but a system of maintaining proper checks on the activities of an organization. These systems make sure that the firm acts responsibly and meets the aims and objectives of its stakeholders. The checks and balances that are focused in corporate governance are both internal and external.
There has been increased emphasis on corporate governance after the fall of Enron and Arthur Anderson. These organizations were looking very profitable, but as it turned out the foundations of these organizations were so weak, that they fell in a matter of few months. Corporate governance is used to detect that there are no errors in the financial reports of an organization and it is reflecting its true picture. Corporate governance practices ask for reducing family control from business and reducing the CEO’s duality. All of these measures prevent the organization from false reports regarding its financial position and performance.Agrawal and Knoeber’s study tried to find out the correlation between the financial performance of a firm and number of independent directors. There were varying results obtained from the research. The study showed that there is no link between the financial performance of the firm and number of independent directors. Later when the theory was further elaborated it was found that there is no link between the performance of the firm and board composition. ...
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