Accounting Literature Review | Corporate Governance and agency theory-understanding the principal-agent problems

$45.00

Curtin University

FNCE3000 Corporate Finance

2016

 

1.0       Overview

 

Table 1.1 – Assessment Schedule

Task Participants Value (%) Date due
Case study Group

(Pairs)

 

20 Week 6

 

Literature Review Individual

 

35 Week 10

 

Final Exam open book 45 Exam week

 

 

The aim of these assessments is to assist you to:

 

  • gain a deeper understanding of corporate finance concepts;
  • appreciate current issues discussed/faced in the industry; and
  • apply your knowledge to investigate real companies.

 

Through these exercises, you will gain a better understanding of how corporate finance concepts can be applied in the real world.

 

This is an excellent opportunity for those who wish to pursue a career as a financial officer/manager.

 

For those who are taking this unit as an elective, it provides the basic foundation and tools needed to investigate the financial health of a company and assist in the decision to purchase its shares for investment.

 

  • Communication

 

  • If you have any queries, please try to approach your tutors first, lecturers second and unit coordinator last;
  • Written communication is preferred;
  • When sending emails to the unit coordinator, please use this format in your subject field: CF, <last name>, <first name>, <student ID>,<location>.E.g. CF307, Smith, John, 123456A, Bentley. The purpose of the email is written on the first line in the main body of the email. You may not receive a prompt reply if you do not follow this format.

 

1.2       Assessment submission

 

  • All assessments are to be submitted on Turnitin; no exceptions. They are to be professional typed; no handwritten submissions;
  • Your work must be assessable through Turnitin. Scanned graphics will not be marked;
  • Plagiarism (including self-plagiarism) is a serious offence. All work above 20% similarity index will be referred to the student disciplinary panel for investigation. The investigation may take up to two month to finalise. If your work is submitted to the student disciplinary panel, you will be notified directly by the student advisers. Your unit coordinator will not be involved in the process. Please refer to Curtin’s plagiarism guide and utilize the checklist provided below:
  • Only your final submission will be marked. Subsequent email attachments after the assessment due date will not be accepted;
  • Your assessment filename must be in the following format: <last name>, <first name>, <student ID>, <location>, <CS or LR>. E.g. Smith, John, 123456A, Bentley, LR.docx. Assessments without this filename format will automatically receive a 2 marks penalty;
  • Assessment extensions must be requested via the extension form accompanied with a medical certificate within 1 week of the assessment due date. Requests after this period will not be accepted;
  • Please submit your work completed to date upon submitting your extension request. This is to show evidence that you have started doing your assignment and have followed the recommended start times as described in this document. We will accept it in any format; regardless of how incomplete your work is. This will enable us to give a better assessment of your case;
  • No pre-marking will be done for your assessments;
  • Please also retain your electronic copy until the final exam finishes for further reference.

 

 

1.3       Exam information

 

  • All exam information will be provided on the first page of the mock exam paper which would be made available to you towards the end of the semester;
  • You may bring in any non-electronic reference material;
  • No individual requests for exam tips would be entertained;
  • Details of supplementary and deferred exams (including the release of results) are provided by central administration. Your unit coordinator will not have any information of the dates;
  • Supplementary exams are awarded by the Board of Examiners. Your unit coordinator is not involved in the process.

 

 

2.0       Case study (20%)

 

Objective: To prepare an analyst report on a public listed dividend paying company.

 

Skills acquired:

  • discipline knowledge;
  • thinking skills;
  • learning how to learn

 

Specifically, conduct research on a company and report on key areas of shareholder analysis, risk-return analysis and cost of capital.

 

2.1       Submission instructions

 

This assignment is due on Monday of week 6 at 2pm.

 

It would be in a group of no more than 2 students. It is your responsibility to find a partner to work with; although your tutor will facilitate this is your tutorial class. Please submit your groups to your tutor by week 2. If you are unable to find a partner by week 3, you will have to complete this assignment on your own. Please ensure that all members’ names are clearly stated on the front page of your assignment and filename of your document.

 

Please allow at least 3 weeks to complete this assignment.

 

The presentation of the case study should be in 1.5 lines spacing and 12pt font. It should not be more than 4,000 in words. The word count excludes tables, diagrams, charts, footnotes and references.

 

Your document must be typed and submitted through Turnitin on the Blackboard by the due date. No email copies will be accepted.

 

Your submission on Turnitin must be done using the following document FILENAME format: <last name>, <first name>, <student ID>, <location>, CS. This refers to the actual document that you are working on, not the Turnitin submission title. Assessments without this filename format will automatically receive a 2 marks penalty.

 

For example:

SmithJ, 12345A, JonesT, 67899B, HarrisonF, 4567458C, Bentley, CS.doc

 

 

 

 

2.2       Case study details

 

You are to select a public listed dividend paying company from the country of your study location (e.g. Australia for the Bentley campus) and conduct a detailed analysis on it. You may not select Dominos as this is the company that will be used in the lecture.

 

The purpose of this assignment is to use your acquired knowledge from this unit to investigate the financial strength of a public listed company. Your research should cover the areas of:

 

  • shareholder analysis;
  • risk-return analysis; and
  • cost of capital.

 

In each of the areas, you are to report your findings using the questions provided below as a guide. If the information is not from the company’s annual report, you will have to provide details on

 

  1. where you sourced the information; and
  2. comment on how you have verified its reliability.

 

The report must be written completely by you. You are not to purchase or reproduce commercial stock reports.

 

2.21 Shareholder analysis (20%)

  • Who are the typical investors in this stock?
  • Who are the marginal investors in this stock?

 

2.22 Risk-return analysis (40%)

  • What are the risks of this company? (Where is this risk coming from (market, firm, industry or currency)? How is the risk profile of the company changing?
  • What return would you have earned investing in this company’s stock?
  • How much would you have under or out-performed the market in the short term?
  • In your view, how much of the performance can be attributed to management?

 

2.23 Cost of capital (40%)

  • Calculate the company’s cost of equity using various methods (at least 2); showing your calculations and detailing the source of your data.
  • Calculate the company’s cost of debt; showing your calculations and detailing your assumptions and the source of your data.
  • Calculate the company cost of capital; showing your calculations.

 

 

2.3       Additional guidelines

 

  • You are preparing an analyst report for a client. Do not merely answers the questions in the case study.
  • It should be written professionally in sentences and paragraphs; not in bullet point form.
  • The questions 2.21 – 2.23 serve as a guide and are not to be repeated in your report.
  • Where possible, calculations must be shown and assumptions must be clearly stated. Use of an appendix is recommended; however, there must be clear reference made to the main body.
  • Where possible, use figures from the annual report; this is the most accurate source of information. For example, some websites may give you the ROE of the company, however, if you do not show your workings, you will not be awarded the marks for it.
  • It is preferable that you reference your work using footnotes. This will help the marker to identify your source without referring to the back of your report. Please refer to the following document for additional help on footnotes: http://writing.wisc.edu/Handbook/PDF/chicago_turabian_uwmadison_writingcenter_june2013.pdf

 

2.31    Shareholder analysis guide

 

  • Choose an Australian company listed on the stock exchange.
  • Download the annual report from www.asx.com.au or the company’s website. Please use the latest available annual report. If the latest annual report is not available for the company, please select another company. Figures from last year’s annual report will not be accepted.
  • Read the summary of the business.
    • What type of investor would invest in this company?
  • Read the chairman’s/director’s message to the shareholders.
    • To whom is the message directed towards?
  • Locate the top 20 shareholdings table in the annual report.
    • Identify who the major shareholders are.
    • What do you think is their motivation for investing in the company?
    • What type of activity do you expect from the majority of the shareholders that you have identified?
  • From the above exercise, you would now be able to describe the profile of the marginal investor in this stock and ascertain the impact of their activities on the company’s long term share price.

2.32    Risk-return analysis guide

 

  • Read the risk disclosure section in the annual report.
    • Summarise where the risks are coming from.
    • From your understanding of the business describe the top three risks that investors should be mindful of and how will these risks will change in the future.
  • The total return to the shareholder is the capital growth plus the dividend received.
    • Use the ASX website, Yahoo Finance or other research sites to determine the one year change in share price of the stock. Use the closing price.
    • Use the ASX website or annual report to determine the dividend paid for the year. If the share is franked, you will have to gross it up to account for franking credits. If the stock pays dividends in foreign currency, you will have to convert that home currency using the exchange rate of the date of dividend payment.
    • Most Australian companies pay twice a year: interim and final dividend.
    • Some companies may pay a special dividend. This should be included in calculating your total one year return.
    • The dates used should match the dates of the annual report.
    • DO NOT select a company that does not pay dividends.
  • You can use the All Ordinaries (AORD) as a proxy for the market. Make sure the date selected for your start and end date correspond to the one you used to calculate your return for the stock.
  • Review the summary of projects undertaken by the company in the annual report. Identify if there is a link to the under or over-performance of the stock relative to the benchmark due to capital investments/projects. How successful are the finance managers of the company in selecting good investments?

 

2.33    Cost of capital guide

 

  • Use figures from the annual report to calculate the company’s cost of equity.
    • CAPM (you will have to either calculate or source for the beta of the company. You can try www.morningstar.com.au or www.reuters.com.
    • You can use the 10 year Australian government bond for the risk-free rate.
    • Dividend growth model (DGM).
      • Refer to page 84-86 of the textbook for formulas and example.
      • All information needed to calculate Rd using the DGM can be found in the annual report
      • Do not include any special dividends as it is a once-off occurrence
    • Select between CAPM and DGM method. Which one do you feel is more accurate/appropriate and why? Use this to calculate the WACC.
  • Business loans rates vary with the terms of the contract. However, you can use the public available information as an estimation.
    • Read the annual report to find the breakdown of the loans and the providers.
    • Go to the provider’s website and locate the interest rate.
    • If you are unable to determine the actual breakdown of fixed and variable rates assume it to be 100% variable.
    • Ensure that you show your workings and include your source as footnotes.
  • What does your calculated cost of capital tell you about the type of future projects that the company can consider?
  • How does knowing the cost of debt and capital help the financial managers in deciding the optimum capital structure?

 


2.4 Marking rubrics

  Below expectations (0 – 49%) Meets expectations (50 – 69%) Exceeds expectations (70 – 100%)
Shareholders analysis

20%

– reproduced substantial sections of annual report, websites, commercial reports

– revealed little understanding of the scope of the case study

– made no attempt to analyse the company’s annual report

– showed little evidence of analysis of the chairman’s message in the annual report

– contained irrelevant material

 

– went beyond simple description of the investor of the selected company

– attempted to analyse the investor’s profile and motivation

– made assumptions that show the level of investigation taken

– showed evidence of analysis of the chairman’s message in the annual report

– showed some evidence of application of the unit’s concepts

– contained no irrelevant content

– explained clearly why the analysis is justified with clear reference to the annual report

 

– showed evidence of planning and effort, reading and understanding

–  showed evidence of deeper level research and currency of response

– provided detail analysis and description of the typical investor of the company

– explored and discuss in depth the investor’s profile and motivation

– showed clear evidence of analysis of the chairman’s message in the annual report

– showed clear evidence of application of the unit’s concepts and explore extensions

–  provided clear assessment of the impact of marginal investors in the context of the chosen company

– explained clearly with aid of diagrams and charts why the analysis is justified with clear reference to the annual report

Risk-return analysis

40%

– reproduced substantial sections of annual report, websites, commercial reports

– revealed little understanding of the implications of the risks

– made no attempt to link risks to future returns of the company

– wrong usage and application of formulas

– did not show full workings

– omitted tax consideration; eg. franking credits

– excluded some dividend payments

– showed little evidence of research into the company’s investment projects

– provided a weak argument to link the performance to managerial abilities

– contained irrelevant material

– clear and succinct summary of the company’s risks

– showed deep understanding of the implications of the risks

– provided clear linkage of the risks to future returns of the company

– correct usage and application of formulas

– included tax consideration; eg. franking credits

– included all dividend payments

– showed strong evidence of research into the company’s investment projects

– provided a strong argument to link the performance to managerial abilities

– contained no irrelevant material

– clear and succinct summary of the company’s risks with evidence of additional research beyond the information provided in the annual report

– showed deep understanding of the implications of the risks with detailed explanation

– provided clear linkage of the risks to future returns of the company using specific examples from the annual report

– correct usage and application of formulas

– included tax consideration; eg. franking credits

– included all dividend payments

– showed strong evidence of research into the company’s investment projects; providing diagrams or tables where appropriate

– provided a strong argument to link the performance to managerial abilities

– contained no irrelevant material

Cost of capital

40%

– reproduced substantial sections of annual report, websites, commercial reports

– revealed little understanding of the task requirements

– wrong usage and application of formulas

– did not show full workings

– no assumptions provided to justify the usage of values used for Rf and Rm

– did not provide clear reasoning on the selection between CAPM and DGM

– used numbers from websites/research houses/analysts’ reports instead of the annual report

– showed little evidence of research into the company’s borrowings and did not provide evidence of where the rates were obtained

– provided a weak argument to link the WACC to company projects/investments

– contained irrelevant material

– demonstrated clear understanding of the task requirements

– correct usage and application of formulas

– showed full workings

– clear assumptions provided to justify the usage of values used for Rf and Rm

– provided clear reasoning on the selection between CAPM and DGM

– used majority of the numbers from the company’s annual report

– demonstrated strong evidence of research into the company’s borrowings and provided evidence of where the rates were obtained

– provided a strong argument to link the WACC to company projects/investments

– contained no irrelevant material

– demonstrated clear understanding of the task requirements with evidence of critical thinking

– correct usage and application of formulas

– showed full workings

– researched into various theories and methods in ascertaining the cost of capital; with discussion on the use and relevance of each method

– clear assumptions provided to justify the usage of values used for Rf and Rm; with commentary on how the data might be improved

– provided clear reasoning on the selection between CAPM and DGM and discussion on other methods

– used majority of the numbers from the company’s annual report and comparing them with other sources

– paid particular attention to the date of the datasets  and discussed the implications of  any mismatch

– demonstrated strong evidence of research into the company’s borrowings and provided evidence of where the rates were obtained; providing clear assumptions

– provided a strong argument to link the WACC to company projects/investments

– contained no irrelevant material

3.0       Literature Review (35%)

The purpose of this assignment is to critically reflect on corporate finance concepts/theories through the reviewing of existing literature.

Skills acquired:

  • Apply discipline knowledge
  • Thinking skills
  • Information skills
  • International perspective

Specifically, you are to write a literature review on Corporate Governance. The structure that you should employ would be as follows:

  • Abstract (200 words)
  • Introduction (2 pages)
  • Body (6 pages)
  • Conclusion (2 pages)

 

Please review following websites for help on writing a literature review:

http://writing.wisc.edu/Handbook/ReviewofLiterature.html

http://www.writing.utoronto.ca/advice/specific-types-of-writing/literature-review

http://www.duluth.umn.edu/~hrallis/guides/researching/litreview.html

http://www.rmit.edu.au/library/literaturereview

https://academicskills.anu.edu.au/resources/handouts/literature-reviews

http://www.canberra.edu.au/studyskills/writing/literature

3.1       Submission instructions

 

This is an individual assignment is due on the Monday of the week 10 at 2pm.

 

The presentation of the literature review should be in 1.5 lines spacing and 12pt font.

Although there is no minimum words limit for the literature review, it should be between 10 – 15 pages (excluding tables, graphs and references).

Please allow at least 4 weeks to complete this assignment.

Your document must be typed and submitted through Turnitin on the Blackboard by the due date. No email copies will be accepted.

 

Your submission on Turnitin must be done using the following filename format: <last name>, <first name>, <student ID>, <location>, LR. This refers to the actual document that you are working on, not the Turnitin submission title. Assessments without this filename format will automatically receive a 2 marks penalty.

For example:

Smith,J, 12345A, Bentley, LR.doc

3.2       Additional guidelines

  • Picking an area: Narrow your area as much as possible. This is to avoid the need to cover an extensive list of journal articles. For example, you may want to identify a variable used in the articles and explore the relevance of its usage.
  • Number of articles: You are expected to read 8 – 12 articles. Please do not just provide a summary of each article and do not reference articles that you have not read or do not understand.
  • Motivation: Your main objective is to critically review/comment on what you have read. DO NOT reproduce definitions, explanation of theories, charts and graphs.
  • Writing: Each section should have at least two or three paragraphs; each paragraph should have at least three or four sentences. Write simple straightforward sentences; one sentence one idea. To avoid having a similarity index on Turnitin, do not paraphrase sentences from the journal articles; use your own words to elaborate.
  • Abstract: Do this after you completed the conclusion. Condense of your whole literature review, including objective, current issues, future research, and the importance of the literature review.
  • Introduction: Start with the background and motivation of the literature review. Describe the aim or objective of the literature review, summarise what you have found from the current literature, what are the current unsolved issues that may lead to the future research. Outline the contribution of the literature review to the finance literature (fills a gap, provides knowledge, argues current issues, and sheds a light on, etc). Explain the significance of the literature review, to investors, to managers, to regulators, etc. Finally map or illustrate the layout of the main body section of your review.
  • Body of the literature review: Do not provide quotes from existing literature. Critique their points and make a reference to it with (Author, year). Try to argue the literature on both sides; do not just summarise. Do not summarise concepts or theories and reproduce diagrams from the textbook; you will be penalised.
  • Conclusion: Discuss what you have found, summarise unsolved issues and important debates. Reinforce the contributions and significance of this literature review and finally, indicate and discuss the future research areas.
  • Additional assistance: Approach CBS Communication Skills Centre. Book an appointment and go obtain assistance on your review before you submit.
  • To search articles, you should use the library journal database, Google Scholar or directly to the home page of the journal.
  • When to start the literature review: As you are not required to explain concepts and theories, you do not need the topic to be covered in the lecture prior to commencement.

 

 

 

 

 

 

3.3 Articles to get you started

 

CORPORATE GOVERNANCE

An overview

Denis, D. K. 2001. Twenty-five years of corporate governance research … and counting. Review of Financial Economics 10(3): 191-212.

Denis, D. K., and J. J. McConnell. 2003. International Corporate Governance. Journal of Financial and Quantitative Analysis 38(1).

 

CEO compensation

Bebchuk, L. A., and J. M. Fried. 2003. Executive compensation as an Agency Problem. Working Paper.

Brick, I. E., O. Palmon, and J. K. Wald. 2006. CEO compensation, director compensation, and firm performance: Evidence of cronyism? Journal of Corporate Finance 12(3): 403-423.

Core, J. E., R. W. Holthausen, and D. F. Larcker. 1999. Corporate governance, chief executive officer compensation, and firm performance.  Journal of Financial Economics 51: 371-406.

Mengistae, T., and L. C. Xu. 2004. Agency Theory and Executive compensation: the case of Chinese State-Owned Enterprises. Journal of Labor Economics 22(3): 29-63.

 

Dividend policy

Brennan, M. J., and A. V. Thakor. 1990. Shareholder Perferences and Dividend Policy. Journal of Finance 45(4): 993-1018.

Miller, M. H., and K. Rock. 1985. Dividend Policy under Asymmetric Information. Journal of Finance 40(4): 1031-1051.

Mitton, T. 2004. Corporate governance and dividend policy in merging markets. Emerging Markets Review 5(4): 409-426.

Short, H., H. Zhang, and K. Keasey. 2002. The link between dividend policy and institutional ownership. Journal of Corporate Finance 8(2): 105-122.

 

 

 

 


3.4 Marking rubrics (condensed version)

 

Criteria Below

Expectations

Meets

Expectations

Above

Expectations

Introducing the idea, problem statement, and issues (15%) Neither implicit nor explicit reference is made to the topic or purpose of the article. The issue / problem to be considered critically is not clearly stated and described. No discussion of the contribution and significance of the topic. Readers are well aware of the overall problem, challenge, or topic of the article. The issue / problem to be considered critically is stated clearly and described with enough information for an adequate understanding. Well identified at least two contributions and two significance of the topic. The topic is clearly introduced, and groundwork is smoothly and thoughtfully laid as to the direction of the article.

 

The issue / problem to be considered critically is stated clearly and described comprehensively (delivering all relevant information necessary for a full understanding).

 

A number of strong contributions and significance were well identified, discussed and specifically related to the topic.

Body:

Flow of the review (10%)

The summary appears to have no direction, with subtopics appearing disjointed. There is a basic flow from one section to the next, most sections or paragraphs follow in a natural or logical order. The summary goes from general ideas to specific conclusions in a smooth and excellent manner. Transitions fluently and exceptionally tie sections together, as well as adjacent paragraphs.
Coverage of content, content development, and perspective (40%) Major sections of pertinent content have been omitted or greatly run-on. The topic is of little significance to the course. No discussion and critiques to articles.

 

The perspective is unclear and does not account for the complexities of the issue. Others’ perspectives are not acknowledged. Did not use appropriate and relevant content to develop and explore ideas within the context of the discipline.

All major sections of the pertinent content are included, but not covered in as much depth, or as explicit, as expected. Significance to the course is evident. Mainly summarizing articles, but with some discussions and critiques.

 

The perspective is clear and takes into account most of the complexities of an issue. Others’ perspectives are acknowledged. The limits of the position are acknowledged. Uses appropriate and relevant content to develop and explore ideas within the context of the discipline.

The appropriate and important content in consideration is widely covered in depth without being redundant. Sources are broadly cited when specific statements are made. Significance to the course is clear, strong and unquestionable. Exceptional discussions in opinion and critiques relevant to articles and practice rather than summarizing articles.

 

The perspective is comprehensive taking into account all of the complexities of the issue. Others’ perspectives are completely analyzed and synthesized. The limits of the position are completely acknowledged. Uses appropriate, relevant, and compelling content to illustrate mastery of the subject.

Clarity of writing and

writing technique, genre and disciplinary conventions, and control of syntax and mechanics (10%)

It is hard to know what the writer is trying to express. Writing is convoluted. Misspelled words, incorrect grammar, and improper punctuation are evident. Did not use language that conveys meaning to readers with sufficient clarity and includes numerous errors. Did not demonstrate consistent use of relevant and important conventions particular to a specific discipline and /or writing task (s) including organisation, content, presentation, and stylistic choices. Writing is generally clear, but a few unnecessary words are used. Meaning is sometimes hidden. Paragraph or sentence structure is quite repetitive. Few spelling, grammar, or punctuation errors are made. Uses language that generally conveys meaning to readers with clarity although writing may include some errors. Demonstrates adequate use of relevant and important conventions particular to a specific discipline and /or writing task (s) including competent organization, content, presentation, and stylistic choices. Writing is very crisp, clear, and succinct. The writer excellently incorporates the active voice when appropriate and supports ideas with examples. Various vocabularies and professional sentence structures are used. No spelling, grammar, or punctuation errors are made. Uses language that skillfully and effectively communicates meaning to readers with clarity and fluency, and is virtually error-free. Demonstrates consistent use of relevant and important conventions particular to a specific discipline and /or writing task (s) including expert organisation, content, presentation, and stylistic choices.
Conclusion: A synthesis of ideas and application. Sources and evidence (15%) No indications of research gaps and suggestions of future research ideas.

 

The conclusions or solutions are unclear. They are not logically supported by the evidence and the process of analysis. There is no indication the author tried to synthesize the information or make a conclusion based on the literature under review.

 

No application to library media center program (reading journals) is provided. Or, did not demonstrate consistent use of credible, relevant sources to support ideas that are situated within the discipline and genre of the writing.

Mentioned some research gaps and some future research ideas.

 

The conclusions or solutions are clear and relevant. They are generally supported by the evidence and the process of analysis. The author provides concluding remarks that show an analysis and synthesis of ideas occurred. Majority of the conclusions were supported in the body of the report.

 

The application to library media center program (reading journals) is stated. Or, demonstrates consistent use of credible, relevant sources to support ideas that are situated within the discipline and genre of the writing.

Well identified important research gaps and logically discussed significant future research ideas.

 

The conclusions or solutions are comprehensive, relevant, significant and organized. They are logically supported by the evidence and the process of analysis. The author made very succinct and precise conclusions based on the review. Insights into the problem are appropriate, important and significant.

 

Conclusions and the application to library media center program (reading journals) are strongly and significantly supported in the review. Demonstrates skillful use of high-quality, credible, relevant sources to develop ideas that are pertinent to the discipline and genre of the writing.

Citations/References (10%) Citation for the article did not follow APA format/Chicago referencing style and was missing essential information. Most citation for the article did follow APA format/Chicago referencing style; however; a few (less than 3) errors in essential information were evident. All citation for the article did follow APA format/Chicago referencing style. All information was clear, consistently accurate and complete.

 

Description

Corporate governance is a wide topic that is concerned with efficient and smooth running of a business. Corporate governance is developed to ensure that organizations follow the laid down structures and regulations in their quest for profits (Ballwieser and Bamberg, 2012). Corporate governance helps to come up with a system of procedures, rules, processes and practices upon which a company should be directed and controlled. In this regard, a company has a duty and obligation to abide by the laid down corporate governance structures and processes in order to evade costly litigations or confrontations with the authorities. Corporate governance is concerned with balancing the various interests of the diverse stakeholders of a company who consist of shareholders, management, government, public, customers, suppliers, financiers, among others. The structures, procedures an practices of corporate governance consists a framework of how a company should achieve its objectives and goals which means that it provides guidelines on almost all spheres of a company ranging action plans, internal control measures as well as corporate disclosure.