Market-Based Corporate Governance System

A A A

DEFINITION

A system relying on the investors of a firm to exert control over how the corporation is to be managed. A market-based corporate governance system defines the responsibilities of the different participants in the company, including shareholders, the board of directors, management, employees, suppliers and customers.



INVESTOPEDIA EXPLAINS

Corporate governance systems have developed differently throughout the world. The market-based corporate governance system is based on Anglo-American law. Since the markets are the primary source of capital, investors are given the most power in determining corporate policies. Therefore, the system relies on the capital markets to exert control over the corporation's management.


RELATED TERMS
  1. CalPERS

    The California Public Employees' Retirement System (CalPERS), an organization ...
  2. Best Practices

    A set of guidelines, ethics or ideas that represent the most efficient or prudent ...
  3. Corporate Governance

    The system of rules, practices and processes by which a company is directed ...
  4. Proxy

    1. An agent legally authorized to act on behalf of another party. Shareholders ...
  5. Internal Controls

    Methods put in place by a company to ensure the integrity of financial and accounting ...
  6. Corporate Governance Quotient - ...

    A metric developed by Institutional Shareholder Services (ISS) that rates publicly ...
  7. Succession Planning

    A strategy for passing each key leadership role within a company to someone ...
  8. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that follows the name ...
  9. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," which ...
  10. AG (Aktiengesellschaft)

    AG is an abbreviation of Aktiengesellschaft, which is a German term for a public ...
Related Articles
  1. Governance Pays
    Options & Futures

    Governance Pays

  2. Evaluating The Board Of Directors
    Insurance

    Evaluating The Board Of Directors

  3. Morningstar's Stewardship Grade Scores ...
    Mutual Funds & ETFs

    Morningstar's Stewardship Grade Scores ...

  4. Who is responsible for protecting and ...
    Investing

    Who is responsible for protecting and ...

  5. CEO Savvy And Stock's Success Go Hand ...
    Personal Finance

    CEO Savvy And Stock's Success Go Hand ...

  6. The Path To Becoming A CEO
    Professionals

    The Path To Becoming A CEO

  7. The SEC’s EDGAR System: Use It Fearlessly!
    Investing Basics

    The SEC’s EDGAR System: Use It Fearlessly!

  8. Top 8 Ways Companies Cook The Books
    Personal Finance

    Top 8 Ways Companies Cook The Books

  9. How To Invest In Corporate Spin-offs
    Chart Advisor

    How To Invest In Corporate Spin-offs

  10. How The Sarbanes-Oxley Era Affected ...
    Fundamental Analysis

    How The Sarbanes-Oxley Era Affected ...

comments powered by Disqus
Hot Definitions
  1. National Best Bid and Offer - NBBO

    A term applying to the SEC requirement that brokers must guarantee customers the best available ask price when they buy securities and the best available bid price when they sell securities.
  2. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin account. In the context of the NYSE and FINRA, after an investor has bought securities on margin, the minimum required level of margin is 25% of the total market value of the securities in the margin account.
  3. Leased Bank Guarantee

    A bank guarantee that is leased to a third party for a specific fee. The issuing bank will conduct due diligence on the creditworthiness of the customer looking to secure a bank guarantee, then lease a guarantee to that customer for a set amount of money and over a set period of time, typically less than two years.
  4. Degree Of Financial Leverage - DFL

    A ratio that measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating income, as a result of changes in its capital structure. Degree of Financial Leverage (DFL) measures the percentage change in EPS for a unit change in earnings before interest and taxes (EBIT).
  5. Jeff Bezos

    Self-made billionaire Jeff Bezos is famous for founding online retail giant Amazon.com.
  6. Re-fracking

    Re-fracking is the practice of returning to older wells that had been fracked in the recent past to capitalize on newer, more effective extraction technology. Re-fracking can be effective on especially tight oil deposits – where the shale products low yields – to extend their productivity.
Trading Center