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].

Contents

General section

• Table - Hypotheses: Effects of performance monitoring systems on corporate performance and other other kinds of institutions of relevance for corporate governance.
• Exhibition - Returns and resources: How corporate returns are linked with the various corporate resources.
• Exhibition - Events and performance measuring: How a performance event effect the measurement of accounting returns versus market returns.
• Model - Perfect capital markets: Fisher separation theorem.
• Table - International corporate governance: Tentative characterizations of legal and empirical state of large firm performance monitoring system in various countries as of 1980-95: 1) Developing countries. 2) Germany. 3) Japan. 4) Anglo-American countries. 5) Denmark.

Special section: Stock price formation

Special section: Fundamental value analysis