Behaviour and Rationality in Corporate Governance

Corporate scandals due to bad accounting happen far too frequently for a system of corporate governance to be deemed effective. This book tells why the safeguards designed to prevent bad accounting so often fail. By studying why the auditors and members of a board of directors regularly fail to deliver the truth about a company's financial state of affairs, this provocative book explores a serious problem in the system of reporting financial information. Exploring the reasons behind corporate misbehaviour, this book also answers the question of whether recent reforms are sufficient to prevent further scandals from occurring in the future. The author examines the independence of reputable intermediaries in the monitoring model of corporate governance and related party reforms. A special focus is on auditors and board directors, but the findings can be extended to other gatekeepers, including bankers and corporate lawyers. The author demonstrates that conventional policies to reform corporate governance such as increased legislation, stronger penalties and more codes of practice are necessary but typically underestimate the pressures which intermediaries face from inevitable conflicts of interest and bias in judgement and decision making. This book is unique in that it draws together various strands of the literature on corporate governance, accounting, law, cognitive research, psychology, behavioural economics and conventional economics to shed light on questions regarding the feasibility of independence and impartiality of boards of directors and external auditors as monitors and gatekeepers in corporate governance. The book is essential reading for professional accountants and auditors, directors, regulators, law makers, corporate lawyers, and investment bankers. It will appeal to all those interested in behavioural economics and corporate governance.Marnet, Oliver is the author of 'Behaviour and Rationality in Corporate Governance' with ISBN 9780415437523 and ISBN 0415437520.