According to the passage given above, which of the following is/are the major benefit(s) of good corporate governance? 1. Good corporate governance leads to an increase in the share price of the company. 2. A company with good corporate governance always increases its business turnover rapidly. 3. Good corporate governance is the main criterion for foreign institutional investors when they decide to buy a company. Select the correct answer using the codes given below:

Passage

Corporate governance is based on principles such as conducting business with integrity and fairness, being transparent regarding all transactions, making necessary disclosures and decisions, complying with all laws of the land, and accountability and responsibility towards stakeholders. Another highlighted point is the need for those in control to distinguish between personal and corporate funds while managing a company. Fundamentally, a company with good corporate governance inspires confidence in the market. The presence of an active group of independent directors on the board contributes greatly to this confidence. Corporate governance influences share prices positively and attracts foreign institutional investors. Unfortunately, it often gains attention only after large scams are exposed.

QUESTION

CSAT

Easy

Comprehension

Prelims 2013

According to the passage given above, which of the following is/are the major benefit(s) of good corporate governance?

Good corporate governance leads to an increase in the share price of the company.
A company with good corporate governance always increases its business turnover rapidly.
Good corporate governance is the main criterion for foreign institutional investors when they decide to buy a company.

Select the correct answer using the codes given below:

Select an option to attempt

Explanation

Statement 1 is correct. The passage explicitly mentions that good corporate governance positively influences share prices, indicating a direct relationship.

Statement 2 is incorrect. While good corporate governance inspires confidence and attracts investors, there is no mention in the passage of it directly or consistently leading to rapid increases in business turnover. The use of "always" makes this statement extreme and inaccurate.

Statement 3 is incorrect. : Although the passage states that corporate governance attracts foreign institutional investors, it does not claim it is the main criterion for their decisions. Other factors may also play a role, which the passage does not elaborate on.