Due Diligence Procedures and Principles for Financial Analysis and Corporate Governance

Journal of Corporate Finance Research, Vol. 12, No. 1, pp. 107-114, 2018

8 Pages Posted: 3 Apr 2019

See all articles by Hugh Grove

Hugh Grove

University of Denver - Accounting and Finance

Mac Clouse

University of Denver - Accounting and Finance

Multiple version iconThere are 2 versions of this paper

Date Written: 2018

Abstract

An initial set of seven procedures is developed for assessing a company’s common stock. A second set of ten procedures is developed for performing stealth or external financial (forensic) analysis on a company’s common stock. Also, a set of eight corporate governance principles, developed in secret over one year by 13 prominent CEOs of U.S. based, global companies, are elaborated for analyzing a company’s corporate governance practices in this paper. The purpose of this paper is to portray how these procedures and principles can be used by financial analysts and Boards of Directors in helping to assess the viability of the companies they are analyzing or serving and to develop key questions to ask of corporate executives. Thus, the first set of procedures elaborates seven reasons to consider in assessing a company’s stock. The second set of procedures develops ten steps of stealth forensics to investigate the possibility of financial shenanigans or fraud by a company. The last set of eight principles assesses the strength of corporate governance in a company. The importance of these principles is demonstrated by matching them with the practices of just 18 mainly global companies that managed to destroy $1.5 trillion of market capitalization. All these twenty-five procedures and principles will help strengthen financial analysis and corporate governance, especially for the role of financial analysts and Boards of Directors in assessing the value of companies’ common stock for investors.

Keywords: Due Diligence, Financial Analysis, Corporate Governance

JEL Classification: G3

Suggested Citation

Grove, Hugh and Clouse, Mac, Due Diligence Procedures and Principles for Financial Analysis and Corporate Governance (2018). Journal of Corporate Finance Research, Vol. 12, No. 1, pp. 107-114, 2018. Available at SSRN: https://ssrn.com/abstract=3346301

Hugh Grove (Contact Author)

University of Denver - Accounting and Finance ( email )

Denver, CO
United States

Mac Clouse

University of Denver - Accounting and Finance ( email )

Denver, CO
United States

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