INSUBCONTINENT EXCLUSIVE:
Small and mid-cap stocks are high risk, high return proposition
That leaves blue-chip companies as haven for bulk of investors
What happens when these stocks lose value on bourses since companies get mired in governance issues Investors in Sun Pharma, ICICI Bank,
ILFS group companies, Yes Bank and Fortis Healthcare will identify with this predicament.
Incidentally, investors can do little when large
companies falter on their governance
However, before actual faltering occurs, leading indicators of failing governance standards do manifest
Shareholders should track such indicators and stay away or exit stock in time
Exit of CFO or company secretary, resignation of independent directors or auditors and regulatory inspection or settlement are some obvious
events that have to be scrutinised.
Some governance issues can also tend to be industry-wide
For instance, almost all large pharma companies have received some adverse observations from USFDA inspection of their facilities showing
lack of observance of governance standards in manufacturing
He modified a famous Jack Welch quote to say that when all in a company stay busy in applauding promoter or CEO, they invariably lose sight
Historically, stocks of MNCs have commanded a premium over stocks of their local peers - predominantly due to presumption of better
promoter or management willing to change and how much of bad governance is priced in Shah said that maximum value gets created when Valia
lining to governance issues faced by large reputed companies in contrast to small companies
