A Survey of Corporate Governance

Bálint Zoltán

Juhász J. Ádám

Nagy Imre

A Survey of Corporate Governance

Finance cases 16/02/2012

This article we had to work with surveys research on corporate governance. Beside that it focuses on the importance of legal protection of investors and of ownership concentration in corporate governance systems.

The first problem we face here is how the suppliers of capital getting a return from corporation for their investments. This method us generally solved by the corporate governance, that assure the flows of money to the firms to the right projects and return the profit partially to investors. Although this mechanism works well in most advanced market economies, it can’t be implied perfectly everywhere.

The researches during the 1990s usually disagree about the effectiveness of corporal governance. They have different idea show should these system works, but they agree in that the United States, Germany, Japan and United Kingdom has the best corporate governance system in the world. The systems in Italy, Russia and some less developed countries are generally considered to be worse.

Other researches from the 1950s claim that product market competion would take care of corporate governance at all, since the competions would force the firms to minimalize the costs that helps them to raise the external capital at the lowest cost. Today we think that only competition is not enough to handle corporate governance, because the competition on the market changes minute by minute and entrepreneurs can’t react that fast. There is a need for effective corporate governance that assures the investors about returns on capital.

Today’s perspective on corporate governance is a straightforward agency perspective, where we separate ownership and control. We need to know how investors get the managers to give them back their money.

The Agency Problem

A. Contracts

The essence of the agency problem is the separation of management and finance, or in other words of...