Corporate finance and governance

Corporate finance and governance refers to the system by which corporations are financed, directed and controlled. The governance structure specifies the distribution of rights and responsibilities among different participants in the corporation (such as the board of directors, managers, shareholders, creditors, auditors, regulators, and other stakeholders) and specifies the rules and procedures for making decisions in corporate affairs. Governance is a mechanism for monitoring the actions, policies and decisions of corporations, which involves the alignment of interests among the stakeholders.

There has been renewed interest in the corporate governance practices of modern corporations, particularly in relation to accountability, since the high-profile collapses of a number of large corporations during 2001–2002. Research in this area deals with various financing, investing and governance issues related to corporations. Typical issues include agency problems between different stakeholders, compensation arrangements with managers and other employees, payoffs to investors, investment and financing decisions, mergers and acquisitions, corporate ownership and governance structures.