Impact of corporate governance on stock market performance in india
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Corporate Governance caught the attention of researchers during 1998 with the Confederation of Indian Industry publishing the desirable voluntary code. SEBI made headway in the field of Corporate Governance by formulating the first ever formal regulatory framework for listed companies on corporate governance on February 2000 under Clause 49 of the Listing Agreements. These regulations were framed based on the suggestions of Kumar Mangalam Birla Committee Report, 1999. These regulations were amended on October 2004 based on the proposals of Narayana Murthy Committee Report, 2003. Very recently, the Ministry of Corporate Affairs formulated guidelines on corporate governance for voluntary adoption by the corporate sector on December 2009. The latest revised Companies Act of 2013 has got provisions relating to Corporate Social Responsibility to be adhered to by corporates.
Corporate Governance encompasses monitoring and market processes, establishing the relationships between the owners of a company and its management, board and other stakeholders and the targets towards which the company is marching.
Though concrete evidence does not substantiate the relationship between good corporate governance and creation of value for an organization, there is strong evidence in the past to affirm the destruction of good values by bad corporate governance. This was strongly demonstrated by the Satyam Scandal in India during 2008 -09 and instances in the corporate world such as Enron, WorldCom, etc. Hence, weak corporate governance is a red signal which has to be carefully monitored by all stakeholders of corporates as well as the government regulatory bodies.
The Cadbury Report defines Corporate Governance as the “system by which businesses are directed and controlled” (Cadbury, 1992). corporate governance refers to generally accepted norms, customs, laws, habits and regulations determining the manner of running the company. To put it on a comprehensive perspective, corporate governance comprises of all efforts to maximize the value of owners of a company without compromising the interests of other stakeholders of the company such as Government, employees, suppliers, customers, competitors, investors and the society. Corporate governance assumes significance in the corporate world as there is a disparity between the owners and managers of a company and this necessitates fair degree of transparency in the managing of affairs of companies to secure trust and buoyancy of all stakeholders. Managers of companies should act as good trustees for assets of the company.
Though corporate governance has been a popular concept in the developed countries, globalization and liberalization has made the topic gain rapid popularity in India and other developing countries of late. Opening up of the Indian economy has thrown open many opportunities and challenges for the domestic firms. They have to confront extensive competition both from domestic and multinational corporates and corporate governance has become a critical factor for them to gain competitive advantage, thereby ensuring their survival.
Corporate Governance encompasses monitoring and market processes, establishing the relationships between the owners of a company and its management, board and other stakeholders and the targets towards which the company is marching.
Though concrete evidence does not substantiate the relationship between good corporate governance and creation of value for an organization, there is strong evidence in the past to affirm the destruction of good values by bad corporate governance. This was strongly demonstrated by the Satyam Scandal in India during 2008 -09 and instances in the corporate world such as Enron, WorldCom, etc. Hence, weak corporate governance is a red signal which has to be carefully monitored by all stakeholders of corporates as well as the government regulatory bodies.
The Cadbury Report defines Corporate Governance as the “system by which businesses are directed and controlled” (Cadbury, 1992). corporate governance refers to generally accepted norms, customs, laws, habits and regulations determining the manner of running the company. To put it on a comprehensive perspective, corporate governance comprises of all efforts to maximize the value of owners of a company without compromising the interests of other stakeholders of the company such as Government, employees, suppliers, customers, competitors, investors and the society. Corporate governance assumes significance in the corporate world as there is a disparity between the owners and managers of a company and this necessitates fair degree of transparency in the managing of affairs of companies to secure trust and buoyancy of all stakeholders. Managers of companies should act as good trustees for assets of the company.
Though corporate governance has been a popular concept in the developed countries, globalization and liberalization has made the topic gain rapid popularity in India and other developing countries of late. Opening up of the Indian economy has thrown open many opportunities and challenges for the domestic firms. They have to confront extensive competition both from domestic and multinational corporates and corporate governance has become a critical factor for them to gain competitive advantage, thereby ensuring their survival.
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