Market-Based Corporate Governance System

AAA

DEFINITION of 'Market-Based Corporate Governance System'

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 'Market-Based Corporate Governance System'

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), ...
  2. Corporate Governance Quotient - ...

    A metric developed by Institutional Shareholder Services (ISS) ...
  3. Internal Controls

    Methods put in place by a company to ensure the integrity of ...
  4. Best Practices

    A set of guidelines, ethics or ideas that represent the most ...
  5. Corporate Governance

    The system of rules, practices and processes by which a company ...
  6. Proxy

    1. An agent legally authorized to act on behalf of another party. ...
RELATED FAQS
  1. Who is responsible for protecting and managing shareholders' interests?

    The average shareholder, who is typically not involved in the day-to-day operations of the company, relies on several parties ... Read Full Answer >>
  2. How do modern companies assess business risk?

    Before a business can assess or mitigate business risk, it must first identify probable or likely risks to its bottom line. ... Read Full Answer >>
  3. Why has emphasis on corporate governance grown in the 21st century?

    Corporate governance refers to operational practices, management protocols, and other governing rules or principles by which ... Read Full Answer >>
  4. What impact did the Sarbanes-Oxley Act have on corporate governance in the United ...

    After a prolonged period of corporate scandals involving large public companies from 2000 to 2002, the Sarbanes-Oxley Act ... Read Full Answer >>
  5. Why should investors research the C-suite executives of a company?

    C-suite executives are essential for creating and enacting overall firm strategy and are therefore an important aspect of ... Read Full Answer >>
  6. What is the difference between a direct and an indirect distribution channel?

    A direct distribution channel is organized and managed by the firm itself. An indirect distribution channel relies on intermediaries ... Read Full Answer >>
Related Articles
  1. Insurance

    Evaluating The Board Of Directors

    Corporate structure can tell you a lot about a company's potential. Learn more here.
  2. Options & Futures

    Governance Pays

    Learn about how the way a company keeps its management in check can affect the bottom line.
  3. Mutual Funds & ETFs

    Morningstar's Stewardship Grade Scores Big

    Morningstar's service gives investors an idea how well fund companies are safeguarding their interests.
  4. Investing Basics

    Explaining Tender Offers

    A tender offer is a broad public offer made by a person or company to purchase all or a portion of the shares of a publicly traded company.
  5. Investing Basics

    Explaining the Volcker Rule

    The Volcker Rule prevents commercial banks from engaging in high-risk, speculative trading for their own accounts.
  6. Investing Basics

    What is a Private Company?

    A private company is any corporation that does not have shares publicly traded in the equity markets.
  7. Fundamental Analysis

    Can Japan's Stewardship Code Turn Passive Funds Into Active Managers?

    Institutional investors in Japan have been criticized for being too cozy with corporates. Can a code force them to focus on the needs of beneficiaries?
  8. Investing Basics

    Explaining Non-Controlling Interest

    Technically, a non-controlling interest is any percentage of ownership that is less than 50% of a company’s voting equity.
  9. Economics

    How Do Accountants Use the Equity Method?

    The equity method is an accounting technique used by firms to assess the profits earned by their investments in other companies.
  10. Entrepreneurship

    Comparing Impact Investing & Venture Philanthropy

    Impact investing and venture philanthropy might be similar, but there are differences and one is more popular than the other right now.

You May Also Like

Hot Definitions
  1. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  2. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  3. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  4. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  5. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  6. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!