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Homework answers / question archive / State true or false and justify your answer: Corporate governance issues have become less important to the financial community during the first decade of the new millennium

State true or false and justify your answer: Corporate governance issues have become less important to the financial community during the first decade of the new millennium

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State true or false and justify your answer:

Corporate governance issues have become less important to the financial community during the first decade of the new millennium.

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False. Corporate government issues are of high concern to the financial community. The standard of the framework of corporate governance impacts a company's access to, and the amount of external financing. It also affects a company's valuation and the cost of capital. External investors and lenders would be less incentivized to offer funds and may charge higher premiums and interest rates respectively if they are uncertain that they would receive an adequate return rate. Companies with weaker corporate governance are highly prevalent in conflicts between majority and minority shareholders, showing that minority shareholders receive very little returns from such a company. Generally, excellent corporate governance increases a company's value by improving its performance through better asset allocation, highly efficient management, and better labor policies.