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Total Solutions Middle East is the leading compliance consultancy and training service company in the Dubai established in 2004, We provides HR Solutions, contracting, outsourcing and Payrolling services as well.
Total Solutions | totalsolutionsmiddle

The impact of corporate governance on investors

Dec 12th 2014 at 1:25 AM

One of the many crucial issues for a company is to deal with investor sentiment. If the investor confidence is high, the share price of the company shoots up. However, the weakening confidence causes the value of the stock to plunge. Therefore, it is always crucial for a company to give major emphasis to its investors while taking important decision. This step is also imperative to maintain a flawless management quality.

Some reports about recent spate of corporate scandals have caused a sharp plunge in the investor confidence. In fact, it has been rated as the all-time low. Mismanagement in companies has been the major factor responsible for this change. Some studies have revealed that companies rated high in good management practices enjoyed higher returns than those rated low on this parameter simply because a better management led to an increase in customer confidence.

The quality of corporate governance is a key issue for these investors. It is because many investors use their savings, which may even include their pensions, to purchase shares in a company. Any financial mismanagement by the company can make them lose their fortune.

Therefore, good corporate governance Middle East favours investors and the sound governance always has a beneficial impact on investors. Let’s see how:

  • Sound corporate governance ensures good returns for the institutional investors.

 

  • Sound corporate governance is also responsible for generating steady cash flow that in turn profits economy.

 

  • Also, it helps society by taking into account social and environmental concerns.

There are ways to boost investor confidence through Good Corporate Governance

Sound ethical and economic principles form the basis for ideal corporate governance. Here are some ways where good governance can boost the investor confidence to a higher level:

  • The investor strategies followed should be sustainable and responsible

 

  • If your company has a board of trustees which is responsible for investment, then the trustees should be screened meticulously to find if they could offer clean corporate management as needed.

Countries with advanced corporate governance strive to maintain a strict adherence to the same. History has witnessed crash of some companies illustrating that even the organizations with a good financial result can go bankrupt if solid corporate governance is missing. Sustainable governance mechanism guarantees the trustworthy work of professionals at every level including non-executive directors, auditors and the board of directors. Therefore, companies develop a number of policies to prevent failures and generate revenue by attracting investors to spend money on their shares.

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