This paper highlights the conflicting
relationship between financial governance and financing. Considering the case
of investment project financing, this paper demonstrated that the external
financing forced managers to a rigorous selection of their projects, regular
repayments and advance planning. On the other hand, financing from financial
market empowers managers to abstain high costs of external financing by
contracting derivatives guaranteeing cash regardless of the project’s quality.
This financial independence may weaken the control mechanisms and encourage
managers to favour their private interests by investing in projects without
added value for shareholders.