ACCT 001A Lecture Notes - Lecture 4: Agency Cost, Insider Trading, Good Governance
19 May 2020
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Document Summary
Management vs. governance: governance is the set of rules that disciplines management, good governance is not the same thing as good management. The financial system: it is the collection of institutions by which financial assets are created and traded, it served the purpose of creating wealth by: Improving allocation of capital: transferring resources from savers (investors) to users (corporations) Improving allocation of risk: risk sharing, hedging, etc: smoothing/timing consumption: allowing investors to borrow and save, disseminating information: prices reflect risk and expected cash flow from an asset. The financial system: institutions: the government, sets the regulatory environment, controls the money supply, interest rates, and the real value of money via the central. Bank: financial markets, regulated (stocks) and unregulated (foreign exchange) institutions which trade financial assets, financial intermediaries, entities which operate within or outside financial markets to facilitate the trading of financial assets. The balance sheet: total value of assets, current assets, fixed assets.
