Financial Daily from THE HINDU group of publications
Friday, Apr 09, 2004
Financial Daily from THE HINDU group of publications Friday, Apr 09, 2004 |
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Markets
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Stock Markets Corporate governance Insider trading rubs heavily: ICRA survey Virendra Verma
Mumbai , April 8 CAPITAL market participants feel that insider trading, selective leak of price sensitive information and dubious accounting practices are their biggest concerns from the corporate governance perspective, says a survey by rating firm ICRA. The survey, conducted among fund managers, brokers and institutional investors recently, says that unethical practices and inadequate concern for minority shareholders are also major worrying factors. Excessive promoter control on management, unrelated diversification and overarching CEOs were also cited as concerns but ranked lower in the order of seriousness. The survey says that a large majority of investors are willing to pay premium for companies with good corporate governance practices. "Over 95 per cent of the respondents stated that they would be willing to pay a premium with good corporate governance practices. However, nearly 60 per cent of the respondents were not in a position to quantify the premium". The survey said that corporate governance practices are at least as important as other quantitative numbers such as financial numbers and growth prospects from the point of view of investment decision making. Investors look at corporate governance while investing in companies, as they feel confident about the integrity of the accounting numbers. Fund managers and brokers feel that the possibility of fraud is less and the interest of minority shareholders will be protected in companies with good corporate governance practice. However, 40 per cent of the respondents admitted to having invested in companies with questionable corporate governance practices in the past, in case the growth and earnings prospects appeared attractive. The capital market participants felt that segment reporting is also very important for ensuring a high level of transparency and disclosure. The survey said that the characteristics of good CG include high level of transparency and disclosures, integrity of accounts, strong and independent board of directors and active board committees.
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