Discussion of the various issues related to corporate governance and Dissertation

Discussion of the various issues related to corporate governance and its impact on financial performance of companies - Dissertation Example The analysis includes a comprehensive literature review on corporate governance, its various mechanisms and the impact on financial performance of firms; as well as P.E.S.T analysis of the four companies. Impact of corporate governance mechanisms on modern companies Contents Sr.# Topic Pg. # 1. Introduction 4 1.1. Purpose of the study 5 2. Brief Background 10 2.1. Meaning and definition 10 2.2. Significance and relevance 11 3. Literature Review 14 3.1. Accounting & Finance Theory: Corporate Governance 14 3.1.1 Corporate governance mechanisms 18 3.1.2. Effect of corporate governance on earnings management 22 3.1.3. Agency theory and corporate governance 25 3.1.4. Corporate governance regulations 3.2. Impact of corporate governance on bank performance 3.3. Relationship between board rules and board effectiveness 3.4. Relationship between board effectiveness and financial performance 4. Industry/ Sector overview 4.1. Banking Sector 4.1.1. HSBC 4.1.2. RBS 4.2. Integrated Oil and Gas sect or 4.2.1. British Petroleum P.L.C. 4.3. Retail sector 4.3.1. J. Sainsbury P.L.C. 5. Research Methodology 6. Findings and Analysis 6.1. P.E.S.T. analysis 6.1.1. HSBC 6.1.2. RBS 6.1.3. British Petroleum 6.1.4. J Sainsbury 7. Conclusion and Recommendations Reference list 1. Introduction The various financial scandals resulting on account of misappropriation of accounts and funds including top British banks such as Barclays Bank for the Libor scandal (The Guardian, 2012a); Lloyds Bank - which resulted in more than ?2 million worth of bonus cuts for the directors (The Telegraph, 2012); HSBC's money laundering scandal (The Guardian, 2012b); among many others have brought the issue of effective controls and monitoring policies of contemporary corporate institutions into question. Such financial and money-laundering scandals are not a recent phenomenon as is evident from the historically infamous cases involving top companies such as Enron and Worldcom among many others whereby the interest s of the stakeholders and the general community were ignored by the management leading to widespread concern. Incidences such as these have raised serious concerns regarding the effectiveness of governing policies required to enhance accountability among the management and help control and monitor their activities and decision making, in order to safeguard the interests of the stakeholders. Scandals such as these are certainly not new and have been witnessed in almost all sectors of the industry. However the rising number of such incidences has brought to light the ineffectiveness of corporate governance policies or their lack thereof in preventing them. It has also given rise to debates regarding the vulnerability of stakeholders against the misappropriation of funds by the management and their lack of control in having a say in company matters. The failure of companies in recent times along with the historical cases whereby various companies were forced to shut down on account of such scandals (including BCCI, Maxwell Communications etc) has prompted researchers to probe into the matter and suggest effective solutions and recommendations with regard to various corporate governance issues. The literature on impact, influence and consequences of lack of corporate governance on financial frauds has grown over the years which reaffirm the consensus on the issue regarding its significance. This study