International Corporate Governance and Sustainability

Question 1

What is corporate governance?

Answer 1

it is a collection of control mechanism that an organisation adopts to prevent self-interested managers from engaging in activities detrimental to the welfare of stakeholders.

Question 2

Why is it important to have an efficient capital market?

Answer 2

Efficient capital markets have fair prices for labor, natural resources and capital. They act as a disciplining mechanism on corporations.

Question 3

What are the methods of alternative financing?

Answer 3

influential wealthy families
large banking institutions
government

Question 4

What is adverse selection?

Answer 4

one party of the transaction has an information advantage and uses this advantage for preferential pricing

Question 5

What is a moral hazard?

Answer 5

one party does not bear the full risk of its actions

Question 6

What is the difference between common law countries and civil law countries?

Answer 6

common law countries are more shareholder oriented while civil law countries are more stakeholder oriented

Question 7

What do the sustainable accounting standards do?

Answer 7

they assure that financial statements convey accurate information to shareholders and stakeholders

Question 8

How are the accounting systems in US and Japan?

Answer 8

they are rule-based

Question 9

How are the accounting systems in Europe?

Answer 9

they are principle-based

Question 10

What are the characteristics of the shareholder-centric view?

Answer 10

primary responsibility: maximise shareholder value
anglo-american countries
sustainable actions are seen as desirable only as long as they lead to an increase in pay