Functions and Responsibilities of Board of Directors and its Committees
The board of directors oversights company operations and serves as the link between its shareholders and managers. It has the ultimate responsibility of ensuring that the company adopts proper corporate governance principles and complies with all applicable laws and regulations….
Mechanisms to Manage Stakeholder Relationships and Mitigation of Associated Risks
In seeking to balance stakeholder interests, a company may employ various mechanisms in stakeholder management. Common mechanisms include: holding general meetings, electing a board of directors, having an audit function, company reporting and transparency, policies on related-party transactions, and remuneration…
Stakeholders Management
Proper stakeholder management is critical to the success of any organization. It involves taking appropriate steps to identify, prioritize and understand each stakeholder group so as to manage them effectively. Effective communication and engagement are, therefore, necessary if an organization…
Principal-Agent Relationships in Corporate Governance
The term ‘Principal-agent relationship’ or just simply, ‘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
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. The corporate governance practices tend…
Chi-square and F-Distributions
Chi-square Distribution A chi-square distribution is an asymmetrical family of distributions. A chi-square distribution with \(v\) degrees of freedom is the distribution of the sum of the squares of \(v\) independent standard normally distributed random variables. Intuitively, chi-square distributions take…
Monte Carlo Simulation
Monte Carlo simulations involve the creation of a computer-based model into which variabilities and interrelationships between random variables are entered. A spread of results is obtained when the model is run hundreds or thousands of times. This explains why this…
t-Distribution and Degrees of Freedom
A student’s t-distribution is a bell-shaped probability distribution symmetrical about its mean. It is regarded as the most suitable distribution to use in the construction of confidence intervals in the following instances:
Continuously Compounded Rate of Return Given Holding Period Return
Continuous compounding applies either when the frequency with at we calculate interest is infinitely large or the time interval is infinitely small. Put quite simply, under continuous compounding, time is viewed as continuous. This is a departure from discrete compounding,…
Relationship between Normal Distribution and Lognormal Distribution
A variable \(X\) is said to have a lognormal distribution if \(Y = ln(X)\) is normally distributed, where “ln” denotes the natural logarithm. In other words, when the logarithms of values form a normal distribution, we say that the original…
