Investment Valuation and Corporate Governance

Companies with quality corporate governance systems can be better positioned to drive higher returns for investors.

Alternatively, poor corporate governance systems can negatively affect a company’s valuation.

Companies with poor corporate governance expose investors to the following risks:

Accounting Risk: a company with poor corporate governance may be more likely to issue misleading or inaccurate financial statements.
Asset Risk: without strong corporate governance, a company’s management may be more inclined to misuse assets.
Liability Risk: a company with poor corporate governance may enable managers to assume too much financial leverage and put equity value at risk.
Strategic Risk: without proper corporate governance, management may engage in business transactions which are not in the long term interests of equity valuation.

Companies with quality corporate governance systems can be better positioned to drive higher returns for investors.

Alternatively, poor corporate governance systems can negatively affect a company’s valuation.

Companies with poor corporate governance expose investors to the following risks:

Accounting Risk: a company with poor corporate governance may be more likely to issue misleading or inaccurate financial statements.
Asset Risk: without strong corporate governance, a company’s management may be more inclined to misuse assets.
Liability Risk: a company with poor corporate governance may enable managers to assume too much financial leverage and put equity value at risk.
Strategic Risk: without proper corporate governance, management may engage in business transactions which are not in the long term interests of equity valuation.