文档介绍：Issues in Corporate Governance
and Disclosure
Federal Reserve Bank of New York
Central Banking Seminar
Preparatory Workshop in Financial Markets,
Instruments and Institutions
Hamid Meran
October 18, 2004
Corporate Governance:
Definition
• The term “corporate governance”
essentially refers to the relationships
among management, the board of
directors, shareholders, and other
stakeholders in pany.
• These relationships provide a
framework within which corporate
objectives are set and performance is
monitored.
Stakeholders
• Managers
• Investors—equity holders and bondholders
• Board of Directors
• Accounting Board
• Securities and mission (SEC)
• Listed Exchanges
• Regulators—states, supervisors in banking,
insurance and public utilities
Managers
• Are likely to be self-interested and may
make decisions that are not in the
shareholders’ best interest.
– They may: waste corporate resources,
diversify the firm, not pay dividends, and not
issue debt.
– Solution: Compensate managers with
equity/stock options.
– Problem: Managers/shareholders may
undertake risky decisions to benefit
themselves at the expense of bondholders.
Example: Risk Shifting by
Stockholders
Interest and Principal=$1,400 Good State with Prob. ½ Bad State with Prob. 1/2
Project A (safe) Good State Bad State
Cash flow ($) 1,800 1,400
Interest and principal ($) 1,400 1,400
Payoff to bondholders ($) 1,400 1,400
Payoff to stockholders ($) 400 0
Expected e ($) 1,800*½+ 1,400*½= 1,600
Project B (risky) Good State Bad State
Cash flow ($) 2,000 1,200
Interest and principal ($) 1,400 1,400
Payoff to bondholders ($) 1,400 1,200
Payoff to stockholders ($) 600 0
Expected e ($) 2,000*½+ 1,200*½= 1,600
Investors
• Small equity holders cannot and have
little incentive to monitor managers.
• Large shareholders have enough at
stake and are able to absorb the cost
of monitoring.
• Who are the large