The influence of Corporate Governance on Teaching in Corporate Finance

Abstract

[EN In the past few years, the development of corporate governance issues has been widely documented in the financial press and studied by academic researchers. The growing interest in corporate governance is supported by the publication of surveys of the topic, for example by Shleifer and Vishny, and more recently by Morck, Wolfenzon and Yeung.1 Books have also addressed this topic, such as the ones by Monks and Minow, and Mallin.2 However, textbooks on corporate finance per se have not yet incorporated this subject. While corporate governance is a centrally relevant area for companies, it also has very important implications for corporate finance of which financial students e the managers and directors of tomorrow e should be aware, ideally from seeing the subject covered in textbooks on corporate finance. The contents of the textbooks on corporate finance are quite standard and they do not mention the corporate governance issue, except for Samuels, Wilkes and Brayshaw; Pike and Neale; Arnold; Smart, Megginson and Gitman; and Brealey, Myers and Allen.3 The first four introduce corporate governance in the first chapter as a key element of an overview of financial management. Samuels, Wilkes and Brayshaw introduce the main recommendations of the Cadbury report, while Pike and Neale describe the principles of good governance. Arnold covers the Cadbury report as well as some corporate governance examples from the UK and other countries, such as Russia and South Korea. In Smart, Megginson and Gitman, corporate governance is considered among the five basic corporate finance functions, besides financing, capital budgeting, financial management and risk management. Finally, Brealey, Myers and Allen address the corporate governance issue in Chapter 2, when discussing the corporate goals, and in Chapter 34, when addressing the financial markets and institutions (including the relevance of investor protection and the development of financial markets) and the ownership control and governance across countries. However, as far as we know, no textbook on corporate finance goes further in the integration of the corporate governance topic. In this context, our literature review reveals that ideally corporate governance should be incorporated in a chapter in the first part of corporate finance textbooks, which would allow students to understand financial decisions better. Additionally, this learning strategy facilitates a broader analysis of these decisions.