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Public Company Communications with Equity Investors and Firm Value

Corporate governance is essentially developed from the characteristics of a public company. In such a company there is a strict division between entrepreneurship and ownership, which results with agency problem between management and stockholders in asymmetric information’s conditions. Therefore is the communication of society with the investor’s public one of the key areas of corporate governance. This is primarily related to existing and potential firm’s stockholders, who use that information for the assessment of existing, or potential investment. There are many ways of communication. Periodically the most comprehensive is by using financial reporting. Unfortunately, today’s common financial reporting practice are not directed to existing and potential firm’s stockholders. Reporting show business value primary as firm’s assets value and stockholders looking on assets as financial potential, and are primary interesting in economic value assessing on expected cash flows and risk reward relationship. Because of that, there are big challenges for the improvement of financial reporting. There are also many challenges form improvement of others ways of firm’s communication in the areas of main risks exposure of firm’s business operation, business strategies, fair approach to investors etc. All this improvements have significant potential for better assessment of firm’s value.

corporate governance, communications with investors public, components of firm’s value, assets value, economic value, risk, financial reporting

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