Dear Ruisi Xu
Please see the attached Paper found in web openly accessable
Corporate governance can have a significant impact on the financial performance of listed companies. Good corporate governance practices help to ensure that companies operate in a transparent, ethical, and responsible manner, which can lead to increased investor confidence and improved financial performance.
I would disagree slightly with Ahmed Abdel Magid 's response in that corporate governance is not correlated in a direct way with financial performance. A company may have good, or even excellent, corporate governance, but that does not mean it will have good financial performance. The opposite may even be true.
However, good corporate governance should limit downside risk. With good corporate governance, a company should be able to reduce the occurrence of governance failings, such as conflicts of interest, fraud, deception of stakeholders and so forth. In this way, good corporate governance may have an indirect, not direct, relationship with financial performance.
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How corporate finance affect listed company financial performance
Corporate finance can have a significant impact on the financial performance of a listed company. Listed companies must make strategic decisions regarding how they use their financial resources to maximize shareholder value, and corporate finance is a critical tool for achieving this goal.
Here are some ways that corporate finance can affect the financial performance of a listed company:
Capital Structure: The way a company chooses to finance its operations and growth can significantly impact its financial performance. For example, a company with a high level of debt may be more vulnerable to economic downturns, while a company with a low level of debt may have more financial flexibility to invest in growth opportunities.
Investment Decisions: Corporate finance is critical for making investment decisions, such as whether to invest in new projects or expand existing operations. These decisions can have a significant impact on a company's long-term financial performance, as they determine the company's ability to generate revenue and profits.
Risk Management: Effective risk management is essential for a company's financial performance, and corporate finance plays a critical role in this process. For example, a company may use financial derivatives to hedge against currency or commodity price risks, which can help to reduce volatility in its financial performance.
Mergers and Acquisitions: Corporate finance is often used to facilitate mergers and acquisitions, which can have a significant impact on a company's financial performance. For example, a successful acquisition can help to increase a company's market share and profitability, while an unsuccessful acquisition can result in significant financial losses.
Overall, corporate finance plays a critical role in the financial performance of listed companies, as it helps to ensure that they are making sound financial decisions that maximize shareholder value over the long term.
Christopher and Ahmed share the same opinion. Those factors Christopher mentions might mediate the relationship. But, numerous studies have established the positive impact of corporate governance on performance.