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Corporate Failure Of Corporate Governance (MDA)

1045 Words5 Pages

For the past decades, the issue of corporate failure has been extensively examined in the developed economies that have been the focus of researchers, academics and professionals since the revolutionary work of Altman in 1968 regarding the multiple discriminant analysis methodology (MDA) to predict corporate bankruptcy (Kosmidis and Stavropoulos 2014, 49). Rankin et al. (2012, 365) mentioned that a massive scale of corporate failure has been started since the first decade of the twenty-first century and it ended with the global financial crisis that has led to economic downturn and recession. The issue of corporate failure has been gaining lots of interests since it can destabilize the economic system in various ways such as an increase in …show more content…

2012, 369). The concept of corporate governance itself has been around since the introduction of the concept of corporations, and it only has been reform globally following numerous corporate scandals like Enron, WorldCom and many others in the early twenty-first century (Siddiqui and Anjam 2013, 36). Hemraj (2002, 141) defined corporate governance as a method in which a firm is being directed, governed and controlled and to the goals for which it is controlled. In short, it is a system by which business operations are directed and controlled (Rankin et al. 2012, …show more content…

2012, 369). The boards who are active in their roles will make sure that they have conduct their research to apply and approve any strategic policy that would benefit the company in achieving the company goals. Rankin et al (2012, 369) also mentioned that they would also be effective in managing the risk and setting an appropriate risk level for an entity to ensure that they are working towards the goal setting and the approved strategies implemented by the company boards. In the case of Enron, poor and weak corporate governance has caused Enron to collapse and was supported by all participants, including Enron’s board of directors, top executive officers, internal and external auditors and also whistleblowers since they were not act and responsible to their duties accordingly (Cuong 2011,

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