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Corporate IssuersModule 3 of 7

Corporate Governance: Conflicts, Mechanisms, Risks, and Benefits

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Concepts

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Formulas

1

Decisions

2

Quiz Questions

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Key Concepts

5 concepts covered in this module.

Principal-Agent Conflict

Managers (agents) may not always act in shareholders' (principals') best interest. Monitoring and incentive alignment needed.

Controlling vs Minority Shareholders

Controlling shareholders may extract private benefits at minority shareholders' expense. Tunneling, related-party transactions.

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Decision Frameworks

1 decision frameworks to guide your analysis.

Good vs Poor governance signals?

  • Good: independent board, separate CEO/Chair, transparent disclosure, aligned incentives
  • Red flags: dual-class shares, related-party transactions, weak audit committee

Mind Map

Visual overview of how concepts connect in this module.

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Flashcard

Principal-Agent Conflict

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Answer
Managers (agents) may not always act in shareholders' (principals') best interest. Monitoring and incentive alignment needed.
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Working Capital and Liquidity