How Corporate Governance Impacts Investors
Investor sentiments are a very critical issue for any company. If the investor confidence is high, the share price of the company soars. If the investor confidence weakens, the value of the stock plummets. Therefore, it is crucial for a company to keep its investors in mind before taking important decisions and to maintain a flawless management quality.
The recent spate of corporate scandals has sent investor confidence plummeting to an all time low. Mismanagement in companies like Enron and World Com left the national exchequer poorer by around $ 80 billion. As recent studies have shown, companies rated high in good management practices had higher returns than those rated low on the same parameters.
Many investors use their savings, including pension funds, to purchase shares in a company. They are set to lose a lot in case of financial mismanagement by the company. Therefore, the quality of corporate governance is a key issue for them.
How Good Corporate Governance Aids Investors;
If the corporate governance is sound, it has a beneficial effect on investors.
1) Good corporate governance aids institutional investors get good financial returns.
2) It helps society by taking in social and environmental concerns into concern.
3) The economy profits from the steady cash flow that sound corporate governance generations.
How to Boost Investor Confidence through Good Corporate Governance;
The ideal corporate governance is based on sound economic and ethical principles. Here are some ways to boost the investor confidence through corporate governance.
1) Your investor strategies should be responsible and sustainable.
2) If you have formed a board of trustees that is responsible for investment, then the trustees should be screened to see if they could offer clean corporate management.