Governance crisis

Investors and analysts pore over financial statements and annual reports to pick the best stocks. But it appears that the biggest risk can't be ascertained unless it reveals itself. That risk is of corporate-governance and regulatory issues. When such an issue is unravelled, the stock price is severely pummelled. In the previous article, we saw some companies whose stocks have collapsed in the last one year. Many of them had some sort of corporate-governance or regulatory issue. Here are the most prominent cases. The numbers in red show the one-year fall in stock price as on January 3 , 2019. Gitanjali Gems | -98.6% Gitanjali Gems was run by Mehul Choksi, who is also the uncle of Nirav Modi. It has now shut its operations following the Nirav Modi scam (see PNB below). Both Nirav and Mehul are currently absconding. Kwality | -92.9% The promoters reduced their shareholding in the company from 64 per cent in June 2017 to 37 per cent in September 2018. Pledging during the same period also increased from 4