Corporate Finance【 Reading 31】Sample
Which of the following best describes the importance of a corporate governance system? A strong corporate governance system: A)
| maximizes shareholder value. |
| B)
| gives the firm the ability to attract and fairly compensate qualified managers to ensure that assets of the company are used efficiently and productively. |
| C)
| is essential for companies to operate efficiently, while the lack of an effective corporate governance system can threaten the very existence of a firm. |
|
A strong corporate governance system is essential for companies and financial markets to operate efficiently, while the lack of strong corporate governance system represents a major operational risk that can threaten the very existence of a firm. A strong corporate governance system cannot in itself maximize shareholder value, but studies have shown that the lack of effective system certainly reduces shareholder value. |