Tech Stock Valuation

230 CHAPTER 10 CORPORATE GOVERNANCE AND THE LEGAL ENVIRONMENT

system all help to ensure that research and development (R&D) and other corporate

resources are effectively administered on behalf of stockholders. The role of the

legal/regulatory system is of particular interest given the recent rise to importance

of state and federal enforcement actions in the wake of recent high-profile break-

downs in the effectiveness of traditional corporate control mechanisms.

I. ROLE PLAYED BY BOARDS OF DIRECTORS

A large and growing corporate governance literature builds upon the work of

Jensen and Meckling (1976), who contemplate the role of corporate control

mechanisms ...