ABSTRACT

This chapter discusses the various theories that have shaped the meanings of Corporate Governance and that have been used in the book to achieve its objectives. It discusses tour main theories: Agency Theory, Stakeholder Theory, Stewardship Theory, and Signalling Theory. The chapter highlights the relevant theoretical divides and to identify their suitability for the discourse. Agency Theory seems to be the dominant theoretical paradigm in the discussion of the firm and its activities, and has been used widely in different aspects of corporate finance and certainly in Corporate Governance studies and analyses. An alternative proposition known as the Stakeholder Theory suggests that a firm's activities should be projected on longer and broader perspectives. The relevance of Stewardship Theory in Corporate Governance discourse includes the alternative perspectives that it enables in the relationship between management and shareholders. Signalling Theory provides significant insight into directors' behaviours and provides important explanations of the relationship between control mechanisms.