Environmental, Social, and Governance Considerations in Investment Analysis
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….
Impacts of Corporate Governance and Stakeholder Management
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…
Corporate Governance and Stakeholder Management
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…
Principal-Agent Relationships
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….
Company’s Stakeholders
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…
Macro Risk, Business Risk, and Financial Risk
Macro risk originates from political, economic, legal, and other institutional factors in an economy, country, or region. As such, some of the factors that catalyze macro-risk include exchange rates, political instability, and gaps in legal or financial structure. Business risks…
Relationship between a Company’s External Environment, Business Model, and Financing Needs
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,…
Business Models
A business model outlines how a business is organized to deliver value to its customers. A business model encompasses the following aspects: Target customers of the business. Supporting logic of the business. How the business serves its customers. Important assets…
Public and Private Corporations
A corporation can either be regarded as private or public. This classification is determined by the following factors: Issuance of shares. Exchange listing and share transfer. Registration and disclosure requirements. 1. Issuance of Shares Public Companies Public companies may issue…
