A firm’s capital structure is the mix of debt and equity it uses to finance its investments. A capital structure decision aims to determine the financial leverage to maximize a company’s value by minimizing the weighted average cost of capital (WACC). $$…

The objectives of a short-term borrowing strategy include the following: Ensuring that there is the capacity to handle sudden cash needs. Maintaining sufficient credit sources to fund cash needs. Ensuring that the interest rates obtained are competitive. Ensuring that a…

ESG considerations are incorporated in investment choices through responsible investing. The essence of doing so is to reduce risk, preserve asset value, and prevent unfavorable social or environmental effects. The concept of sustainable investment involves choosing assets and businesses on…

A variety of performance metrics may be used to assess risks related to governance concerns. Among others, such concerns include ownership structure, board independence and composition, and remuneration. Analysts and stockholders have long recognized the risks associated with bad governance….

Weaknesses in corporate governance practices and stakeholder management processes expose a company and its stakeholders to several risks. On the contrary, effective corporate governance and stakeholder management practices can yield benefits for a company’s stakeholders. Adopting effective rules and implementing…

Stakeholder management emphasizes the need for a company to consider the needs of all its stakeholder groups. It aims at laying the structure for stakeholder groups to exercise influence, control, and protect their interest in a company. Corporate governance lays…

The term ‘principal-agent relationship’ or simply just ‘agency relationship’ is used to describe an arrangement where one entity, the principal, legally appoints another entity, the agent, to act on its behalf by providing a service or performing a particular task….

Corporate governance may be defined as the system of internal controls, processes, and procedures by which a company is managed, directed, or controlled. Weak corporate governance practices have resulted in the failures of many companies. Shareholder and Stakeholder Theories Corporate…

A firm’s financing needs and risk profile depend on its business models and other factors. These factors can be classified into external and firm-specific factors. External Factors Economic conditions: Macroeconomic variables such as GDP growth, exchange rates, interest rates, inflation,…