The paper focuses on investigating any correlation between market condition (i.e., in terms of corporate valuation) and the principles of governance in the corporate legal system. It was generally believed that the word `governance' used in the corporate legal system, perhaps, is more of a simile than metaphor, because the corporate legal system is more of an outcome of private arrangement than a public system of governance which originally evolved from a political system. Present investigations demonstrate that the market is more responsive towards issues of fair dealing, transparency and accountability, which are mandates in favor of good governance. The authors have concluded with the observation that there is a nexus between the two and the second depends on the first.

There are many arguments about the origin of corporate governance; some are of the opinion that its genesis was as early as 1932, with the great depression in the United States economy. However, acceptance of the concept perhaps started in the 1960s with the strong emergence of transnational corporations. The essence of corporate governance is very similar to the governance of a state. It is to promote greater transparency1 in the affairs of the governors towards the governed, to promote a greater sense of accountability amongst the governors towards the responsibility they hold and further, to provide greater safeguards for the governed towards any abuse of power2 as it is well known that power corrupts and absolute power corrupts absolutely.

Thus, it becomes clear that corporate governance measures need to be prescriptive as well as
non-prescriptive. By the former, we mean the prescription of norms which would be compulsorily followed by companies and non-prescriptive ones mean where companies themselves are allowed to understand the importance of looking after the interests of all the stakeholders whose interest (e.g., primarily monetary interests) stand attached to the company's proper functioning and reaping good profits. An effort is being made to show the nexus which exists between corporate governance and corporate valuation in both, prescriptive as well as non-prescriptive measures. For the purpose of the same, certain methods of valuation shall also be briefly discussed.