Mechanisms and Controls
Corporate governance mechanisms and controls are designed to reduce the inefficiencies that arise from moral hazard and adverse selection. For example, to monitor managers' behavior, an independent third party (the external auditor) attests the accuracy of information provided by management to investors. An ideal control system should regulate both motivation and ability.
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Famous quotes containing the word controls:
“Comparatively, we can excuse any offense against the heart, but not against the imagination. The imagination knows—nothing escapes its glance from out its eyry—and it controls the breast.”
—Henry David Thoreau (1817–1862)