Investors should look at how companies are run

Picking firms with strong governance will reduce risk of loss due to corporate misbehaviour

The distress Hyflux is in can be traced to insufficient attention to the risk of diversifying from its core business, says the writer.
The distress Hyflux is in can be traced to insufficient attention to the risk of diversifying from its core business, says the writer.LIANHE ZAOBAO FILE PHOTO

When it comes to choosing stocks, most investors use traditional financial metrics such as earnings, return on equity and net asset value. Some might look at charts while others use a combination of fundamentals and technical indicators.

It is about time retail investors looked at another important aspect - the company's corporate governance. This is because companies that are well governed tend to perform better than those with weak or poor governance.

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A version of this article appeared in the print edition of The Sunday Times on November 22, 2020, with the headline 'Investors should look at how companies are run'. Print Edition | Subscribe