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What is corporate governance?
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Key topics
 The big picture
 Stock price formation
 Fundamental value analysis
International corp. governance

Incentive mechanisms
 Decision system
Performance monitoring
 Incentive based compensation
 Bankruptcy system
 Ownership structure
 Creditor structure
 Capital structure
 Market for corporate control
Labor market competition
Product market competition

Related topics
Transaction cost economics
 Positive economics



Performance monitoring system

Introduction: The performance monitoring system is here defined as the legislation or the investment tools that make it possible for the firm's constituencies to gather and analyze information about the firm's economic performance. Prominent examples are the corporate disclosure rules regarding accounts and other corporate information that enables investors to price the equity of these companies or rate their creditworthiness. An example of an investment tool that is used for performance monitoring is the discounted cash flow approach used to estimate the fundamental value of a company. Such performance monitoring systems are of major importance in corporate governance because their ability to provide accurate information about the firms economic performance affects the incentives of managers and thereby the economic efficiency of the firm. Classic references on performance monitor systems are Jensen and Meckling [1976], Copeland, Koller and Murrin [1996].


General section

Special section: Stock price formation

Special section: Fundamental value analysis

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