Case study

Name Rana Usma Khalid

Sap Id 70071282
Subject Finical Management
Teacher Mam Gull Rukh
Question 1
What is corporate governance, and what is the role of corporate governance?
Corporate governance in the business context refers to the systems of rules, practices, and
processes by which companies are governed. In this way, the corporate governance model
followed by a specific company is the distribution of rights and responsibilities by all
participants in the organization.
role of corporate governance
The purpose of corporate governance is to facilitate effective, entrepreneurial and prudent management
that can deliver the long-term success of the company. Corporate governance is the system by which
companies are directed and controlled. Boards of directors are responsible for the governance of their
companies. The shareholders’ role in governance is to appoint the directors and the auditors and to satisfy
themselves that an appropriate governance structure is in place.

Question 2
What is corporate valuation model?
The corporate valuation model begins with finding the value of assets you already own. This
includes equipment, machinery, property, vehicles and any supplies or inventory. "Assets-in-
place" are those items that you actually use in your current operations. Think of any item you
own whose purpose is to create income and you can readily identify operational assets. Value
them by comparing them to similar items companies are selling, or by finding the original
purchase price and subtracting any amounts you have depreciated for each asset.

Question 3
How does corporate governance effect corporate valuation model (corporate value)?
When valuing a company as a going concern, there are three main valuation methods used by
industry practitioners: (1) DCF analysis, (2) comparable company analysis, and (3) precedent
transactions. These are the most common methods of valuation used in investment banking,
equity research, private equity, corporate development, mergers & acquisitions (M&A),
leveraged buyouts (LBO), and most areas of finance.
1: Comparable Analysis
Comparable company analysis (also called “trading multiples” or “peer group analysis” or
“equity comps” or “public market multiples”) is a relative valuation method in which you
compare the current value of a business to other similar businesses by looking at trading
multiples like P/E, EV/EBITDA, or other ratios. Multiples of EBITDA are the most common
valuation method
2: Precedent Transactions
Precedent transactions analysis is another form of relative valuation where you compare the
company in question to other businesses that have recently been sold or acquired in the same
industry. These transaction values include the take-over premium included in the price for which
they were acquired.
3: DCF Analysis
Discounted Cash Flow (DCF) analysis is an intrinsic value approach where an analyst forecasts
the business’ unlevered free cash flow into the future and discounts it back to today at the firm’s
Weighted Average Cost of Capital (WACC).
Question 3
Briefly explain the selected firm's corporate governance and management control for
financial policies (Capital Structure).

Design/methodology/approach
Multiple regression analysis on a panel data was used. Further, we applied three different
approaches of static panel data “pooled OLS, fixed effect and random effect.” Fixed-effects
estimator was selected as the optimal and most appropriate model. In addition, to control for the
potential endogeneity problem and to profoundly analyze the study data, the authors perform the
one-step system generalized method of moments (GMM) estimator. Dynamic panel GMM
specification was superior in generating robust findings.

Findings
The findings clearly unveil that all explanatory variables in the study model have a significant
influence on the firm’s financing decisions. Moreover, the results report that the impact of board
size and board independence are more positive under conditions of a high level of gender
diversity, whereas the influence of CEO duality on the firm’s leverage level turned from negative
to positive. In a nutshell, gender diversity moderates the effect of board structure on a firm’s
financing decisions.

Research limitations/implications
This study was restricted to one institutional context (Palestine); therefore, the results reflect the
attributes of the Palestinian business environment. In this vein, it is possible to generate different
findings in other countries, particularly in developed markets.

Practical implications
The findings of this study can draw responsible parties and policymakers’ attention in
developing countries to introduce and contextualize new mechanisms that can lead to better
monitoring process and help firms in attracting better resources and establishing an optimal
capital structure. For instance, entities should mandate a minimum quota for the proportion of
women incorporation in boardrooms.