Business Ethics and Corporate Governance, Second Edition

INVESTORS’ PREFERENCE FOR GOOD GOVERNANCE

A recent large-scale survey of institutional investors found that a majority of investors consider governance practices to be at least as important as financial performance when they are evaluating companies for potential investment. Indeed, they would be prepared to pay a premium for shares in a well-governed company compared to a poorly governed company exhibiting similar financial performance. In the US and UK, the premium was 18 per cent while it was 27 per cent for Italian and 27 per cent for Indonesian companies.²⁴ Likewise, a survey by Pitabas Mohanty (Institutional Investors and Corporate Governance in India) has revealed that companies with good corporate governance records have actually performed ...