Corporate Governance and Investment Decisions

There has been a growing international focus on Corporate Governance, particularly in the wake of worldwide financial turbulence and scams. As a result, investors have lost faith in the financial statements. After the Satyam scandal, investors suffered huge losses. Good corporate governance should aim at bringing the investors back to the market. A need was felt to know the linkages between corporate governance and investment decisions.

A structured questionnaire was administered to brokerage firms to know the level of importance they attached to corporate governance while investing. Garrett ranking Test is used to know the key characteristics of good corporate governance, and the most desirable characteristic of the BOD from the view point of brokerage firms.

Respondents ranked maintaining integrity of accounting statements as the most important characteristics for corporate governance, fewer possibilities of frauds (ethical behaviour) as the second most important characteristic, maximizing shareholders value as the third most important characteristic, followed by sound risk management practices and protecting minority shareholders' interest.