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Corporate Governance
Concerned with holding the balance between economic and
social goals and between individual and commu...
What is Corporate Governance?
Contd…
The primary purpose of corporate
leadership is to create wealth legally
and ethically...
Constituents of CG
The Management
To act on the direction of the BOD Implement & Monitor control Systems
Shareholders & St...
Business Ethics & Corp Gov.
Discipline that examines good or bad
practices within the context of a moral duty.
Business et...
Ethical
Issues
Company-
Shareholder
Relations
Company-
Community
Employee-
Employer
Relations Employee-
Employee
Relations...
Organization with good ethical practices
CAPITAL MARKET SCAMS
INTRODUCTION TO
“BIG BULL OF THE TRADING FLOOR”
• HARSHAD MEHTA
• THE GREAT INDIAN SCAM -1992
WHO WAS HARSHAD MEHTA ?
STARTED HIS CAREER WITH NEW INDIA
ASSURANCE COMPANY
QUIT HIS JOB IN 1981 TO BECOME A SUB-
BROKER
W...
WHAT WAS THE SCAM ABOUT?
DIVERSION OF FUNDS
USE OF READY FORWORD (RF) TO MAINTAIN
SLR (STATUTORY LIQUIDITY RATIO)
CREATIVE...
HOW IT WAS DONE AND THE ROLE OF BROKER ?
• MEHTA SOON MASTERD THE TRICKS OF TRADE BY MANAGERING
SEVERAL BROKERS AND SET OU...
EXPLOITING THE LOOP HOLE IN THE BANKING SYSTEM
• HE TRIGGERED THE RISE IN BOMBAY STOCK EXCHANGE IN THE YEAR 1992 BY TRADIN...
HIS FAVORITE STOCKS INCLUDED
• ACC
• APOLLO TYRES
• RELIANCE
• TATA IRON AND STEEL CO. (TISCO)
• BPL
• STERILITE
• VIDEOCON
THANK YOU!
By,
Sanket Bhawarkar
Mustahid Ali
Corporate governance
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Corporate governance

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Corporate governance importance, good governance and bad governance, scams, indian scams,Harshad Mehta Scam

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  • introduced a model that incorporated a dominant determinant in regard to the dividend policy. The model was formulated after undertaking a study which included a sample of 28 corporate entities in U.S during 1950s. As part of qualitative research, Lintner carried out an interviewwith CEOs and CFO of various firms around U.S. From this research, the author established that dividend policy was an active factor. This was because the managers had a belief that stable dividends were quite effective in reducing negative perceptions among investors. Lintner further observed that dividend payments and retained earnings are simply the by-product of dividend policy. Therefore, this emphasized on the active determinant of dividend policy and generally, majority of shareholders had a preference of dividend policy that was smooth. In addition, the author established that managers had a believe that investors had a preference of stable dividends and that the market put premiums on organizations that harboured stable dividend policy. Other scholars claim that the share values are particularly influenced by the division of earnings between retention and dividends. In particular, they contend that the prepositions espoused by MM are reasonable at least to some extent considering their restrictive assumptions. However, they also note that dividend policy begins to have significance upon removal of these assumptions. Gordon, financial scholar explains that shareholders who may be at risk averse may have a preference of dividends over the promise of future capital gains. This owes to the fact that dividend s are consistent, hence providing certainty. On the other hand, future capital gains have lesser certainty. In some occasions, this may be referred as the “bird in the hand theory”. In Gordon’s view, dividends reduce uncertainty among investors, making them to discount a company’s future earning 3. at a rate that is lower, thus increasing the value of this farm. On the other hand, failure in paying dividends will ultimately increase uncertainty among investors. This will consequently lead to low share prices while raising the rate of discounts. In the event that the presumption of no transaction costs for investors is sidelined, then it will be taken that investors care on whether they receive capital gains or cash dividends. In the perspective of MM, investors with stock and pays poor or little dividend could regularly sell a portion of their holdings in satisfying the current requirements of income. In reality however, differentials of odd lot and brokerage charges turns such liquidations to be quiet expensive. Further, they also make them inadequate substitutes for common dividend payments. In essence, empirical evidence concerning whether dividend policy has an effect of an organizations’ value is mixed. There are some scholars and studies, which have suggested that owing to the tax effects, investors, would need pre-tax returns that are higher on higher dividend payout when compared to low dividend payout stocks. However, there are also other studies, which have established that share prices are not really affected by the dividend policies. Nonetheless, a number of practitioners presume that dividends are significant particularly for their information content. Moreover, they feel it is important because of the equity capital, which is more costly when compared with retained equity. Therefore, when formulating an optimal dividend policy it is important for a firm to consider shareholder preferences alongside the investment opportunities, as well as the relative cost of retained equity against the equity that is externally raised. a) Download the annual report of Imperial Tobacco Group plc., aFTSE 100 company, and assess its capital structure. Use a report format. Your submission should consider: Capital Structure From Imperial Tobacco Group’s annual report site, it is apparent that the company finances its assets in various ways. Among these is the share buybqack program, which was initiated in 2011. The program has been a continuous process since then and has utilized £500m cash so far. In supporting faster debt clearance, the company announced the acquisition of U.S assets and terminating the share buyback initiative. The aim in this endeavor was to keep the company’s capital structure effective while maintaining a sheet flexibility that is also balanced. From this report, we also identity that equity funding for Tobacco Group appears to be more expensive when compared to debt funding. Share buyback have significantly reduced the amount of equity and hence returns to the available shareholders are poised to improve. Further, the company has been able to retain an effective mix of equity and debt in its capital structure.
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Corporate governance

  1. 1. Corporate Governance Concerned with holding the balance between economic and social goals and between individual and communal goals. Encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society
  2. 2. What is Corporate Governance? Contd… The primary purpose of corporate leadership is to create wealth legally and ethically This translates to bringing a high level of satisfaction to five constituencies -- customers, employees, investors, vendors and the society-at-large The raison d'être of every corporate body is to ensure predictability, sustainability and profitability of revenues year after year.
  3. 3. Constituents of CG The Management To act on the direction of the BOD Implement & Monitor control Systems Shareholders & Stakeholders To participate in appointment of Directors To Hold the BOD through proper disclosures The Board Of Directors Pivotal Role Directs Management
  4. 4. Business Ethics & Corp Gov. Discipline that examines good or bad practices within the context of a moral duty. Business ethics include practices and behaviors that are good or bad. Moral conduct is behavior that is right or wrong.
  5. 5. Ethical Issues Company- Shareholder Relations Company- Community Employee- Employer Relations Employee- Employee Relations Company- Customer Relations
  6. 6. Organization with good ethical practices
  7. 7. CAPITAL MARKET SCAMS
  8. 8. INTRODUCTION TO “BIG BULL OF THE TRADING FLOOR” • HARSHAD MEHTA • THE GREAT INDIAN SCAM -1992
  9. 9. WHO WAS HARSHAD MEHTA ? STARTED HIS CAREER WITH NEW INDIA ASSURANCE COMPANY QUIT HIS JOB IN 1981 TO BECOME A SUB- BROKER WENT BANKRUPT IN 1982 AND RECOVERED SOON TO BECOME MORE STRONGER HE WANTED TO BECOME THE MOST SUCCESSFUL BROKER- THERE BY HE EARNED THE NAME OF “THE BIG BULL”
  10. 10. WHAT WAS THE SCAM ABOUT? DIVERSION OF FUNDS USE OF READY FORWORD (RF) TO MAINTAIN SLR (STATUTORY LIQUIDITY RATIO) CREATIVE ACCOUNTING INTRA-DAY TRADING
  11. 11. HOW IT WAS DONE AND THE ROLE OF BROKER ? • MEHTA SOON MASTERD THE TRICKS OF TRADE BY MANAGERING SEVERAL BROKERS AND SET OUT ON DANGEROUS GAME PLAN • MEHTA TAKES OFF THE HUGE MONEY FROM SEVERAL BANKS AND MILLION OF INVESTORS WERE CONEDIN THE PROCESS. • HIS SCAM WAS EXPPOSED AND THE MARKET CRASHED.
  12. 12. EXPLOITING THE LOOP HOLE IN THE BANKING SYSTEM • HE TRIGGERED THE RISE IN BOMBAY STOCK EXCHANGE IN THE YEAR 1992 BY TRADING IN SHARES AT PREMIUM ACROSS MANY SEGMENTS • TAKING ADVANTAGES OF LOOPHOLES IN THE BANKING SYSTEM, HARSHAD AND HIS ASSOCIATES TRIGGERED A SECURITIES SCAM DIVERTING FUNDS TO THE TUNE OF RS 4000 CRORES FROM THE BANKS TO STOCK HOLDERS BETWEEN APRIL 1991 TO MAY 1992 • HE WAS ARRESTED AND BANED FOR LIFE FROM TRADING IN THE STOCK MARKETS • MAJOR CULPRITS WERE BROKERS, BANKERS AND FINANCIAL INSTUTIONS. • HE WAS CHARGED WITH 72 CRIMINAL OFFENCES. A SPECIAL COURT ALSO SENTENCED SUDHIR MEHTA, HARSHAD’S BROTHER, 6 OTHERS, INCLUDING FOUR BANK OFFICIALS. • THEY GOT RIGROUS INPRISONMENT FROM 1 YEAR TO 10 YEARS ON A CHARGE OF DUPING STATE BNK OF INDIA TO THE TUNE OF RS 600 CRORES IN CONNECTION WITH THE SECURITES SCAM THAN ROCKED THE FINANCIAL MARKETS IN 1992.
  13. 13. HIS FAVORITE STOCKS INCLUDED • ACC • APOLLO TYRES • RELIANCE • TATA IRON AND STEEL CO. (TISCO) • BPL • STERILITE • VIDEOCON
  14. 14. THANK YOU! By, Sanket Bhawarkar Mustahid Ali

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