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Value Maximization, Stakeholder Theory, and the Corporate Objective Function
Abstract
This paper examines the role of the corporate objective function in increasing corporate productivity, social welfare, and the accountability of managers and directors. Because it is logically impossible to maximize in more than one dimension, purposeful behavior requires a “single-valued” objective function. Two hundred years of work in economics and finance implies that, in the absence of externalities and monopoly, social welfare is maximized when each firm in an economy aims to maximize its total market value.
The main contender to value maximization is stakeholder theory, which argues that managers should attempt to balance the interests of all corporate stakeholders, including not only financial claimants, but employees, customers, communities, and governmental officials. By refusing to specify how to make the necessary tradeoffs among these competing interests, the advocates of stakeholder theory leave managers with a theory that makes it impossible for them to make purposeful decisions. With no clear way to keep score, stakeholder theory effectively makes managers unaccountable for their actions (which helps explain the theory's popularity among many managers).
But if value creation is the overarching corporate goal, the process of creating value involves much more than simply holding up value maximization as the organizational objective. As a statement of corporate purpose or vision, value maximization is not likely to tap into the energy and enthusiasm of employees and managers. Thus, in addition to setting up value maximization as the corporate scorecard, top management must provide a corporate vision, strategy, and tactics that will unite all the firm's constituencies in its efforts to compete and add value for investors.
... Berle and Means (1932) minimize the conflicts between ownership and professional management by establishing the aspects involved in governance. However, the Agency Theory (Jensen;Meckling, 2008) addresses conflicts and considers semantic interpretations to be the main factors in understanding and using terms related to governance, as stated by Souza (2005). The author defines the modes of communication and interaction environments that support the content communicated and processed in the conversational spaces of the corporate governance process. ...
... Babic (2003) calls corporate governance a power structure that involves decisionmaking issues and the exercise of leadership, with methods that meet established interests and emerging demands -thus strongly influenced by the legal institutes and respective regulatory frameworks inherent to each country. Jensen (2000), in turn, considers that corporate governance mechanisms are structured into four categories: ...
... Agency Theory (Jensen, 2000) identifies the treatment of this conflict as principles of governance. Berle and Mens (1932) define the first governance approaches to minimize the organizational impact resulting from the individual and collective choices inherent in the conflict. ...
... The stakeholder theory from the perspective of corporate governance proposes that enterprises should pursue long-term shareholder wealth and pursue sustainable growth based on being responsible to stakeholders [8]. As a non-financial indicator, ESG is included in the executive compensation can reduce the short-sightedness of managers and encourage them to shift their target to the long-term value growth of the enterprise, as an incentive means for the company to maintain its reputation and enhance long-term shareholder value [9]. ...
... Jensen argues that "enlightened shareholder wealth maximization" in essence aligns the interests of shareholders with the broader interests of society and the environment [8]. Enterprises can thrive and generate sustainable returns through creating values for stakeholders, not only shareholders. ...
ESG, as values in the global sustainable transformation, drives technology, societal and institutional innovation and its uncertainty influence corporates strategic management and operation activities. Incorporating ESG metrics in executive compensation has become a trend of corporate governance for global companies in recent years. First, this paper theoretically reviews internal and external factors of the ESG-linked compensation incentives, analyses the specific governance mechanism. On this basis, this paper summarises ESG performance and corporate financial performance incurred by ESG pay. Lastly, this paper puts forward future extensive research direction and provides references for subsequent research. Specifically, governance effect by ESG-linked compensation needs to consider institutional feature (developing country and developed country). The consistency between carbon emission policy and economic development determines that ESG performance is limited by the economic development stage and industrial structure of the country. This review contributes to construct analysis framework by Governance Incentives Governance Mechanism Governance Effect to conclude general rule and future research prospect of ESG pay.
... ESG practices, such as sustainability initiatives, diversity and inclusion efforts, and ethical governance, may give rise to agency conflicts within organizations. Shareholders seeking shortterm profits may prioritize financial performance over long-term sustainability, while managers may recognize the importance of ESG factors for maintaining stakeholder trust and securing the firm's future viability (Jensen, 2002). This misalignment of interests can lead to tensions between shareholders and managers regarding the allocation of resources and strategic priorities. ...
... Effective ESG practices enable firms to build trust and goodwill among stakeholders, leading to enhanced reputation and brand value (Porter & Kramer, 2011). Moreover, agency theory suggests that aligning ESG goals with shareholder interests can mitigate agency conflicts and improve firm performance (Jensen, 2002). ...
This study investigates the relationship between Environmental, Social, and Governance (ESG) practices and firm performance within the context of two prominent Malaysian companies, IOI Corporation Berhad and YTL Corporation Berhad, over a 10-year period. The research aims to address the growing interest in sustainable business practices and their implications for organizational success. The introduction highlights the importance of ESG integration in driving long-term value creation, stakeholder engagement, and competitive advantage in today's global business landscape. The problem statement emphasizes the need to understand the impact of ESG practices on firm performance, particularly within the context of family-owned businesses. Despite the growing recognition of the importance of sustainability, empirical evidence linking ESG practices to financial and non-financial performance outcomes remains limited, especially in the Malaysian context. The research objectives aim to fill this gap by examining the trends and patterns in ESG practices and firm performance over the 10-year period. The methodology involves a comprehensive analysis of secondary data obtained from publicly available sources, including annual reports, sustainability reports, and financial statements of IOI Corporation and YTL Corporation. The findings reveal significant positive trends in ESG practices across both companies, with corresponding improvements in financial and non-financial performance metrics. Descriptive analysis highlights the mean scores and frequency distributions of ESG variables, while trend analysis elucidates the upward trajectories in environmental, social, and governance practices over time. Correlation analysis underscores the strong relationships between ESG practices and firm performance indicators, further validating the business case for sustainability. In conclusion, the study provides compelling evidence that ESG practices have a significant impact on firm performance, as evidenced by the case studies of IOI Corporation and YTL Corporation. These findings have important implications for theory, practice, and policy, emphasizing the strategic importance of ESG integration in driving organizational resilience, competitiveness, and long-term value creation.
... This is concerning from an efficiency standpoint, critics of stakeholder democracy often argue. The more stakeholders are enfranchised, they argue, the higher the costs of reaching collective agreements are and the harder it is to establish a single goal to be optimized, given the greater diversity of relevant interests, and to track managers' performance relative to this goal (Hansmann, 1996;Jensen, 2002;Heath and Norman, 2004). But since these efficiency costs will be further discussed in the next section, here 10 we focus on another extensional implication: that the principle would require the inclusion not just of the stakeholders just cited, but also of competing companies, whose interests corporate policies also substantially affect (Goodin, 2007: 62). ...
... First are increased decision-making costs, for the greater the number of enfranchised stakeholders, the more heterogeneous the interests included are, and the higher the costs of reaching agreements on corporate decisions is (Hansmann, 1996). Second are the costs stemming from a greater difficulty to optimize the firm's value, for the more objectives the firm is to pursue as the number of stakeholders increases, the more dimensions on which management is to optimize the firm's value, absent a single measure to rank competing dimensions (Jensen, 2002). Third are increased agency costs, for the more stakeholder interests the top management has to serve and respond to, the harder it becomes for each stakeholder to track management's performance relative to such interests, and the greater the accountability costs (Heath and Norman, 2004). ...
Despite growing interest in workplace democracy, the question whether nonworker stakeholders, like suppliers and local communities, warrant inclusion in the governance of democratic companies, as workers do, has been largely neglected. We inspect this question by leaning on the boundary problem in democratic theory. We first argue that the question of who warrants inclusion in democratic workplaces is best addressed by examining why workplace democracy is warranted in the first place, and offer a twofold normative benchmark—addressing objectionable corporate power and upholding efficiency—to assess the principles of democratic inclusion on offer. Against this benchmark, we next argue that the All-Affected Principle is unfit due to its over- and underinclusive extensional results, and that the All-Subjected Principle, whose variants we examine alongside their extensional results, holds more promise when coupled with independent considerations of justice or a constrained variant of the All-Affected Principle. These combinations need not entirely preclude, but speak against, nonworker stakeholder inclusion.
... These studies include Bénabou & Tirole (2010); Masulis & Reza (2015) and Krüger (2015). Specifically, Bénabou & Tirole (2010) and Krüger (2015) found evidence consistent with agency theory that managers tend to overinvest in social activities to enhance their personal reputation and lose focus on core managerial responsibilities (Jensen, 2002). (2023) ...
... Prospectors are known as companies that tend to discover new markets, long-term growth, and high innovation, thus carrying high failure risks (Maniora, 2018). From an investor perspective following agency theory, because prospectors incur high costs at the beginning of the year such as research and development costs and marketing costs, the costs incurred for ESG activities can inflate company costs (Friedman, 1970); (Jensen, 2002). These different strategic orientations can lead to different approaches to ESG practices and value creation. ...
p> Background : The sustainability issue has become a global conversation both in society and especially in the business world. Climate change, social crises, and environmental issues pose threats to the global economy, especially for developing countries with weaker infrastructures compared to developed nations, thus necessitating sustainable practices, one of which is through ESG disclosure.
Objective : This study aims to empirically examine the influence of ESG performance on firm value with business strategy using Miles & Snow's typology (1978) as a moderator.
Research Methodology : This study uses unbalanced panel data regression with fixed effects using robust standard error to prevent bias in testing the formulated hypotheses. The population in this study consists of non-financial sector companies listed on the Indonesia Stock Exchange (BEI) from 2018 to 2022, with a sample of 194 companies. The data collection method utilizes purposive sampling. Data is analyzed using the panel data regression method.
Research Findings : The results of this study show that ESG performance has a significant negative impact on firm value. Furthermore, this research finds that business strategy can moderate the relationship between ESG performance and firm value, where it strengthens the negative relationship between ESG and firm value. Additional analysis reveals that the defender strategy weakens the negative relationship between ESG and firm value. Meanwhile, the other two strategies are unable to moderate the relationship between ESG and firm value.
Originality/Novelty of Research : This is a study examining the influence of ESG on firm value with business strategy as a moderator in the non-financial sector companies in Indonesia listed on the BEI using data from 2018 to 2022</p
... Environmental accounting is characterized as the recognizable proof, arrangement, assessment and examination of ecological costs data for better dynamic inside the firm and which assists chiefs with satisfying corporate natural targets (Uford and Joseph, 2019) as in (Jensen, 2010). It can likewise be characterized as "the age, examination, and the utilization of monetary and non-monetary data to improve corporate, ecological and financial execution, accomplishing a manageable business (Malik and okere, 2020). ...
The disclosure of CSR activities has gained significant attention as a means for organizations to demonstrate their commitment to ethical business practices. In view of this, this study examined the effect of corporate social responsibility disclosure & financial performance of listed industrial goods firms in Nigeria. Ex-post facto research design was adopted, and panel data covering ten (10) years (2013-2022) were collected across twelve (12) firms listed in industrial goods sector in Nigeria which formed the sample size of the study. The data collected were analyzed using descriptive statistics and multiple linear regression analysis via E-views 10.0 statistical package. The study findings included that community responsibility disclosure has a positive significant relationship (Coeff. = 0.0305{0.0047}) with return on equity of listed industrial goods firms in Nigeria while philanthropic responsibility disclosure has an insignificant negative relationship (Coeff. =-0.2898{0.0608}) with return on equity of listed industrial goods firms in Nigeria. It also revealed that social responsibility disclosure has a positive significant relationship (Coeff. = 0.2103{0.0165}) with return on equity of listed industrial goods firms in Nigeria. Hence, it was concluded that strong commitment to CSR disclosure exhibits exceptional financial performance. The study recommended, amongst others, that companies should reevaluate philanthropic initiatives to ensure they align with corporate strategy and positively impact financial performance
... They offer strategic advice on retaining earnings for long-term goals, aligning with the company's financial strategy (Jensen, 2010). Supervising financial planning, they ensure sound decisions align with overall strategies (Sarbah et al., 2015). ...
The objective of this study was to examine the impact of corporate governance on the financial choices of non-financial companies operating in the Australian Securities Exchange. A purposive sampling technique was employed to select a total of 113 firms representing 14 sectors listed in the Australian Securities Exchange during the period from 2008 to 2021. The findings of the study revealed a positive and significant relationship between the size of the board, gender diversity among board members, board member affiliation and board compensation with the financial decisions of the corporations. Additionally, the study identified that the presence of experienced and non-executive board members had a negative and significant impact on internally generated funding. Furthermore, it was observed that board gender diversity, board size, board member affiliation and board compensation displayed a positive and significant association with debt financing, internally generated financing and equity financing. Most organisations displayed a preference for internal and debt financing over equity funding. Aligning governance with financial decisions enhances firms’ cost of capital. Governance quality affects capital market access, debt and equity costs. Effective governance leads to favourable financing terms.
... It was observed that, currently, it quite readily accepted that shareholder value maximization is in line with satisfying certain interests of people with a stake in the firm. Jensen (2000) as cited by Garriga and Mele (2004) refers to this concept as "enlightened value maximization" Garriga and Mele (2004) describe the second group under instrumental theories as being focused on how to allocate resources with the view of achieving long-term social objectives and creating a competitive advantage. Three approaches can be added; social investment in competitive context, natural resource-based view of the firm and its dynamic capabilities, and strategies for the bottom of the economic pyramid. ...
The concept of Corporate Social Responsibility is increasingly used in the banking industry, being perceived as a tool to develop a positive image and attract new customers. Proponent argued that corporations or firms increase long term profit by operating with Corporate Social Responsibility (CSR) perspective. This study sought to examine the effect of corporate social responsibility on rural and community banks. Questionnaire was used as the data collection instrument. A total of five (5) Rural Community Banks were sampled for the study. Eleven (11) respondents were chosen from each rural and community bank, making a total of 55 respondents. The respondents were chosen from 6 categories of stakeholders of each bank. Descriptive statistics (mean and standard deviation) were used to analyze all the data on the research questions for the study. The study revealed that Corporate Social Responsibility has effect on the commitment of stakeholders. Philanthropic activities, scholarship scheme and donations to orphanages and government institutions were the popular Corporate Social Responsibility activities undertaken by RCBs. Cause-related marketing such as supporting social events, programme and campaigns, entertainment and culture were identified to be the corporate social responsibility activities to maximize performance. It was therefore recommended that RCBs should ensure that donations and philanthropic activities are done in a manner that would represent the company and improve its image or goodwill as well as ensuring consistent and proper implementation of CSR activities which are in line with policy.
... Currently, key interpretative contributions provided by stakeholder management widely address both the management of market and social relations (Ackoff, 1994;Emshoff, 1978;Freeman & Reed, 1983;Jensen, 2001;Mitroff & Mason, 1981;Trist, 1980) and paths and approaches needed to promote sustainable corporate social responsibility (CSR) (Carroll, 1991;Clarkson, 1995; Centre for Business Ethics, 1999;Freeman & Velamuri, 2006;Goodstein & Wicks, 2007). ...
This paper employs the interpretative lens provided by stakeholder theory to garner novel insights for research and managerial practices within the framework of high-reliable organizations (HROs). It proposes an interpretative matrix for analyzing and explaining how stakeholders’ behaviors and interactions can transition from a “strategic” to a “responsibility” approach in the context of risk management. The paper adopts a qualitative methodology based on a case study of the Italian Civil Protection - an HRO - during the COVID-19 pandemic. Through the analysis of institutional sources and reports, we apply two theoretical frameworks to examine how the organization's engagement strategy changed in response to an unexpected event. This case serves to illuminate the main implications and practical applications of shared conceptual re- reflections. The principal implications are traced in terms of theory, practice, and policy, focusing on the joint examination of organizational reliability and stakeholder engagement theory, the potential utility of the proposed case study, and the feasible policy actions. The main limitations of this study lie in the purely qualitative methodology employed, the nature of the organization analyzed, and the territorial scope of the study. Future works will address an empirical investigation of the theoretical relations uncovered herein, as well as the expansion of the spectrum of analysis (e.g., private organizations) and a cross-country widening of the level of analysis.
... This perspective is crucial for evaluating the comprehensive goals of stakeholder capitalism, which include environmental protection, social justice, and financial equality, especially in the context of existing corporate governance frameworks and market dynamics [48]. Both stakeholder capitalism and systems theory promote a holistic approach that seeks cumulative progress across organizational systems [49]. They stress that modifications made in one area should be accompanied by complementary adjustments in other areas to maintain the equilibrium and functionality of the system [50,51]. ...
This qualitative study employs a thematic network analysis of the literature to explore the implications and evaluations of the 'Great Reset'. Delving into how complexity theory, especially the principles related to complex systems and coordination, can be applied, this research aims to promote resilience and facilitate comprehensive systemic transformation. This study identifies critical 'Great Reset' components that align or conflict with stakeholders' needs, objectives, and capabilities by examining how diverse stakeholders function within intricate and interconnected systems.
... Concern for others beyond the corporate in-group has only more recently been recognized as an important responsibility of business that needs to be integrated with the economic concerns [23] . Two unique streams of research have brought these "enlightened" aspects of corporate responsibilities to the forefront of attention. ...
近年来，企业社会责任(CSR)问题受到社会各界的广泛关注。有观点 认为，企业通过能力建设积极参与社会公共事务，有利于发展中国家的进步， 企业社会责任通过政府和社会资本合作(PPP)促进了发展。在马尔代夫，企 业社会责任仍是一个新兴研究领域。从现实情况来看，作为小岛屿发展中国 家(SIDS)，马尔代夫面临着巨大的环境挑战——资源的缺失与生态系统的脆 弱使其被认定为环境脆弱型国家。因此，企业(特别是私营企业)对其实现 可持续发展发挥着重要作用。
基于上述现实问题与对相关文献的梳理，本文评估了马尔代夫在企业社
会责任方面的实践情况，探究了承担社会责任对企业绩效的影响状况，以及
环境监管的中介作用，从财务、经济与社会环境三个方面探索了马尔代夫的 可持续发展能力。通过上述研究，本文得到以下主要结论:第一，企业社会 责任的总体排名与企业绩效之间存在显著关系，其中社区和治理维度显示为 正相关，员工和环境维度显示为不相关。第二，环境管理对企业可持续发展 具有直接正向影响，环境监管和报告在其中发挥着积极的中介作用。最后，需要注意的是，在可持续发展维度的影响中，社会可持续性的影响最大 企 业可持续性中的经济和环境方面次之，并且在企业内部实践与可持续发展二 者关系中，利益相关者(股东)的参与起着极大的中介作用。
本文研究结果表明，企业承担社会责任对企业财务绩效、企业可持续性
以及马尔代夫商业可持续发展均有较强影响。本文研究贡献主要有四点:一
是通过研究企业社会责任对企业绩效的正向影响，改善了企业承担社会事务 的商业理念;二是启发了马尔代夫的决策者们，对上市公司的社会责任绩效 进行评级;三是本文涉及了监管与报告的中介作用，为利益相关者(股东)
未来评估投资的企业提供了依据，并有利于推动小岛屿发展中国家进行环境 管理和可持续发展;最后本文启示，要加强关键利益相关者的关系管理，通 过合规透明的措施，促进整体可持续发展。
The concepts and practices of Corporate Social Responsibility are continuing to gain considerable attention from business leaders, government officials, and academics. More recently, it has been argued that a purposeful engagement of corporations in societal affairs through an active contribution to capacity building is crucial for the progress of developing nations and corporate social responsibility could be a vehicle for development through public-private partnerships. The field of corporate social responsibility is still uncovered ground, at an early stage of development in the Maldives. Furthermore, given the immense global environmental challenges and their social and economic consequences, developing countries, especially small island developing states such as the Maldives are environmentally vulnerable and struggling for sustainability.
Moreover, environmental issues such as climate change, waste, and pollution have been frequently discussed and debated among experts and practitioners, and in the world media. Small Island Developing States (SIDS) have been recognized as being environmentally vulnerable because they tend to have a small set of resources and have delicate fragile land and marine ecosystems and a relatively high vulnerability to natural disasters. Hence, the role of businesses, especially the private sector businesses in achieving sustainability has ever been important. Considering past studies and immense literature about corporate social responsibility and various dimensions of corporate responsibility towards achieving better corporate performance reflects on society, economy as well as environment. This thesis aims to evaluate the current understanding and practices of corporate social responsibility, environmental management practices, other related corporate internal practices towards achieving corporate financial performance, corporate sustainability, and sustainable development. The in terms of financial, economic, social, and environmental aspects in the context of the Maldives and explores the potential for sustainability through three main studies.
As for the methodologies and research discipline employed, for the first study on the impact of corporate social responsibility on corporate financial performance, the secondary data related to corporate social responsibility, financial variables have been collected from the Maldives Stock Exchange, and through content analysis, a corporate social responsibility index was developed for the study. Where else, for the last two studies, a brief focus group discussion and a preliminary test were conducted through a focused group meeting with industry experts before data were collected from senior management of registered businesses in the Maldives. Data for the three studies were analyzed using various statistical software such as the Statistical Package for the Social Sciences (SPSS) and tested using variance-based structural equation modeling (SEM) and the partial least squares (PLS) estimation technique, which is implemented in the statistical software package Advanced Analysis of Composites (ADANCO) 2.0.1.
Findings from the first study demonstrated a significant relationship between overall CSR ranking and financial. However, among the dimensions of CSR, only the community and governance have a significant positive association with financial measures, whereas else the dimensions of employees and environment do not have any significance with financial performance. Furthermore, the study two results showed that environmental management practices have a direct and positive effect on corporate sustainability. Likewise, environmental regulation and reporting positively mediate the effect of environmental management practices on corporate sustainability. Among the sustainability dimensions, it is important to note that the social sustainability aspect has the highest impact, followed by the economic and environmental aspects of corporate sustainability. The research implication and future research directions provided from the first study, required the final study if identify the impact of corporate internal practices towards sustainable development with the mediating effect of stakeholder involvement and the results proved that there is a strong effect of the mediating effect of stakeholder engagement on the relationship between corporate internal practices and sustainable development.
To summarize, the majority of the finding of the studies presented relatively a stronger relation between corporate social responsibility practices towards achieving positive corporate performance in terms of corporate financial performance, corporate sustainability, and sustainable development of business in the Maldives. The study results delivered the expected research objectives and provided implications to control the effect of corporate social responsibility dimensions on businesses' performance strategically and to revise business philosophies to a socially responsible approach. It also contributes to helping the decision-makers to come up with concepts to initiate and provide a social performance rating for the Maldives listed companies. Furthermore, the studies presented in the thesis served as noteworthy research for stakeholders to evaluate against regulatory and reporting requirements for businesses they invest in in the future. It adds value to the literature and attempts to advance environmental management and sustainability research in the context of small island developing
states as well. The thesis results present are noteworthy and practical for stakeholders and policymakers to follow through the necessary compliance and transparency measures that impact overall sustainability as well as strengthening the key stakeholder relationship management for striving in the with overall corporate performance for the business in the future.
... The above discussion indicates that the relationship between GCG and firm value can be tuned through CSR engagement. In this context, the stakeholder theory suggests that building mutual relationships with stakeholders via ethical and social standards (CSR actions) would improve the company's financial performance (Freeman, 1984;Jensen, 2001). However, two branches may be related to stakeholder theory, namely, the managerial (positive) and the ethical (normative) branches (Deegan et al., 2000). ...
Purpose-This paper aims to investigate the direct and indirect links between good corporate governance (GCG) and firm value using corporate social responsibility (CSR) as a mediating variable. Design/methodology/approach-The data used in this research was collected from the Thomson Reuters Eikon ASSET4 database, involving 108 financial institutions belonging to 12 European countries listed on the stock exchange between 2007 and 2019. A multivariate linear regression analysis was conducted to test the hypotheses of this study. Findings-Our results show that GCG has a positive effect on the firm value and CSR practices. Interestingly, the results indicate that CSR positively influences firm value. The results also reveal that CSR partially mediates the relationship between GCG and firm value. Originality/value-This study contributes to the literature by providing evidence on how GCG increases firm value with the mediation mechanism of CSR in the link between GCG and firm value. To the best of our knowledge, it is the first research work documenting that GCG leads to better CSR, which ultimately results in increasing firm value of companies from the financial sector by bridging the information gap for this critical industry in the context of a developed market like Europe.
... More research remains in examining accounting standards against other religious prac-even more explicit. This, however, would bring considerable opposition from agency theorists who continue to argue that management can only maximize on one dimension at a time and this should be profit (Jensen, 2001). Sundaram and Inkpen (2004) have revived this argument as well as their claim that the goal of shareholder maximization is pro-stakeholder, an argument we have suggested that is not difficult to re-but. ...
This paper takes a Biblical perspective to the accounting concept of equity is a cornerstone of teaching and practice as an essential element in accounting. In accounting, equity is “the residual interest in the assets of the entity after the deduction of its liabilities” (SAC4). While accumulation may be an outcome of hard work, the general thrust of the Scriptures is against the desire to accumulate. Two problems emerge from accumulation. First is a personal problem; Jesus’ teaching suggests that the desire to accumulate earthly riches robs the individual of the desire for spiritual accumulation. The second is the impact on others; for the desire to accumulate for oneself can be to the detriment of the other. We argue that this second problem is prevalent in 21st century capitalism and provides a significant challenge for Jesus’ disciples in business today. The paper suggests solutions both at individual, organizational, and societal levels.
... Virtually every finance textbook lists the goal of financial management as maximizing the value of owner's equity. However, Jensen (2001) suggests that the financial management goal should be restated as enlightened value maximization because the long-term market value of a company cannot be maximized if any constituency is mistreated or ignored. Because the constituents are in competition with each other for the resources of the firm, an enlightened stakeholder should recognize that managers will be forced to make tradeoff decisions. ...
Financial instruments trade in markets where the prices paid are based on either promised or predicted future cash flows. The time that elapses between the purchase of a financial security and the ultimate payment of the promised or predicted cash flow creates opportunities for selfish behavior, errors, and fraud. The best that can be said about the net impact of laws and associated regulations that address these market flaws is that they have, perhaps, minimized confusion. What is the most efficient way to summarize prescriptive ethical behavior in business dealings and financial transactions? This paper advocates three biblical concepts as the proper focus. If routinely applied, the standards of proportionality, transparency, and integrity would establish trust and support both market and stakeholder values within the world of finance.
... Stakeholder theory suggests that various social contracts have to be negotiated with different groups of stakeholders due to the fact that different stakeholders have different views on how the business should be conducted (Harrison & van der Laan, 2015). Thus, stakeholder theory aims to identify these actors to increase the knowledge of what and who affects the organization's management decisions (Jensen, 2002). Organizations have both internal and external stakeholder groups, who have an interest in how the business operates. ...
This study examines the influence of digitalization on audit planning, evidence and reporting in Nigeria. Through the analysis of empirical data, the study explores the relationships between audit digitalization and key audit variables, including audit planning, audit evidence, and audit reports. The data were sourced from primary sources through the use of questionnaire. The collated data were analysed using regression analysis and descriptive statistics. The findings reveal significant positive associations between audit digitalization and these variables, indicating the potential benefits of digital technologies in enhancing audit processes. The results demonstrate that audit digitalization explains a substantial portion of the variance in audit planning, audit evidence, and audit reports, with R-squared values ranging from 77.5% to 80.3%. These finding aligned with the findings of previous studies. Based on the findings, several recommendations are put forward. Independent audit firms are encouraged to embrace digital transformation by adopting digital tools and technologies. Investing in training programs to enhance auditors' digital skills and data analytics capabilities is also recommended. The results consistently demonstrate significant positive relationships between audit digitalization and key audit variables, including audit planning, audit evidence, and audit reports. Furthermore, implementing cybersecurity measures and regularly updating digital tools are crucial for safeguarding sensitive information and ensuring the effectiveness of digitalization efforts.
... Scholars acknowledge that maximizing all stakeholders' values is a near-impossible task for managers (Jensen, 2002) . It is logically impossible to maximize multiple dimensions simultaneously, as managers would lack a basis for reasoned decision-making if they were instructed to maximize current profits, market share, future growth, and other objectives simultaneously. ...
In today’s competitive economy, the war for talent has intensified. Organizations are increasingly investing in student engagement initiatives to build a robust talent pipeline. Among these initiatives, the offering of internship placements is a popular choice as it not only helps identify suitable talent, students can also benefit with valuable opportunities to develop work-related skills and gain experience. However, ensuring mutually beneficial outcomes for all stakeholders involved remains a challenge due to diverging expectations among stakeholder groups. This study aims to enhance our understanding of high-quality internship design by applying stakeholder theory (ST) and the expectancy theory of motivation (ET) as theoretical frameworks. Qualitative research methods were employed, including semi-structured interviews with key stakeholders from higher education institutions, human resources managers, and front-line supervisors as well as a focus group with graduating business students. Thematic analysis of the data revealed several key themes related to stakeholder priorities and interests. The findings of this paper contribute to the fields of ST and ET by addressing an under-researched area: the motivations of supervisors as crucial stakeholders in delivering the internship experience. Scholars and practitioners have largely overlooked this aspect. From a managerial perspective, the findings highlight opportunities for fostering more synergistic partnerships between stakeholders, not only at the institutional level but also among internal stakeholder groups, including top management, human resources functions, and front-line supervisors.
... The new model is 1 Nwanji and Howell (2007) provide a detailed review of the academic literature debating the relative merits and drawbacks of the shareholder and stakeholder models of corporate governance. Marcoux (2000) and Jensen (2002) criticize stakeholder theory because they claim that it does not explicitly specify how managers should balance the potentially conflicting interests of various stakeholders when making capital budgeting and other business investment decisions. Nevertheless, recent studies such as Dhaliwal et al. (2011), Qian (2011), Flammer (2013), Koh et al. (2014), Harrison and Wicks (2013), Wang et al. (2016), Matos (2020) and Vishwanathan et al. (2020) find that the consideration of stakeholder concerns when making business decisions can have a positive impact on firm performance. ...
This paper constructs a capital budgeting framework within which shareholder theory and stakeholder theory are complements, not substitutes. Shareholder theory focuses managerial attention on a single goal: the maximization of a firm’s long-term value. Stakeholder theory identifies the necessary prerequisites for long-term value maximization. In particular, to create long-term value for shareholders, a firm must first create value for current and future customers and employees, and it must not do so at the expense of the broader community, or society as a whole. The new model is unique in that encourages managers making capital budgeting decisions to explicitly consider tail risks, defined as events that, while unlikely, could have a significant impact on a firm’s operations and valuation. Within this framework, the net present value (NPV) rule provides an objective decision rule to constrain managerial discretion and to balance the interests of competing stakeholders in the project selection process.
... From an economic perspective (Jensen, 2002), the relationship that investors have with respect to CSR is strategic for an organization to have a long-term market share. That is, actions that increase value for stakeholders (including clients) should be seen as an opportunity to reaffirm organizational values that, in the medium term, will generate value for the firm, whether tangible or intangible (Erhemjamts and Huang, 2019). ...
Purpose: This study investigates, from a corporate social responsibility (CSR) perspective, the relationships that exist between selected interested publics and the results of the organization from the point of view of its administrator. Design/Methodology/approach: For this purpose, a survey was conducted and analysed using partial structural equations. This study was conducted in four states in the central region of Mexico. The variables under study were: environmental, social, employee and investor’s commitment as perceived by managers and organizational results. First, the validity of the construct was verified, and subsequently, the relationships between the variables for which the results were satisfactory were analysed. Findings: The relationships between environmental, social, employee, and customer commitments were verified. Finally, the relationship between the client's commitment and the results perceived by the administrator is verified. It is concluded that more efforts are being made in this line of research to identify the progress of Mexican organizations’ CSR strategies. Suggested research for future work is also presented, considering new trends in the approach presented. Originality/value: The results confirm the of the manager/director’s commitment is essential to CSR and their results. In the Mexican case, there are few studies related to this important topic. This research could be also helpful for Latin-American business.
... 164 Eventually Jensen himself argued for "enlightened stakeholder theory" by describing a test for value maximization that was remarkably Friedmanite: "Spend an additional dollar on any constituency provided the longterm value added to the firm from such expenditure is a dollar or more." 165 CSR was now an advantage in competitive markets, rather than a tool of monopoly. ...
This article is the first to reconstruct the intellectual history of Milton Friedman's criticism of business and its social responsibilities. Using original archival research and printed evidence, this article makes three major arguments. First, Friedman's criticisms of business and its social responsibilities evolved over time and emerged from persistent anxieties among economic liberals about monopoly, business interests, and political authority that were explicitly read from Adam Smith. Second, the article contributes to the emerging intellectual history of corporate social responsibility (CSR) by reconstructing the development of Friedman's criticisms, their transformations, and their reception within the context of American managerial thought from the 1950s to the 1980s. Finally, contextualizing Friedman's criticisms demonstrates his concern about decision-making logics within organizations, which in turn explains his belief that CSR would contribute to collectivization and enhances the understanding of neoliberal political thought.
... An embedded economy is therefore necessarily a moral economy where moral norms and predispositions inform the market, while themselves are also being affected and shaped by market conditions [16]. This symbiotic relationship sharply contrasts the traditional neoclassical understanding of the role of the firm as being essentially single-dimensional, namely in maximizing shareholder value, while remaining largely agnostic to morality, except for cases that can affect its bottom line [17,18]. ...
The chapter addresses the impacts of ethics in business’ competitiveness as they are naturally emerging in an embedded firm—i.e., a business organization that is “lifted out” from its market environment and instead explicitly takes into consideration social and environmental factors—e.g., socio-historical capital, environment, local resources, etc. In doing so we adopt the realist approach of the “soft” Polanyian interpretation of embeddedness where business organizations retain their corporate nature and continue to operate in the market economy; embeddedness is then built around the market economy and is expressed on the way the business organization is active in its relevant markets. Capital accumulation and other conventional corporate goals continue to drive the firm’s behavior which is now further impacted by local socio-ecological systems and a greater sense of responsibility and purpose.
... Every company has clear goals, including the meatball noodle business. The company aims to maximize profits (Bekmezci, 2015;Jensen, 2002). Thus, the company needs to decide to achieve maximum profit (Haessler, 2020). ...
Optimization of the amount of production to maximize profits is still an obstacle to the growth of MSMEs in Indonesia. This study aims to determine the combination of the production amount of each Bakso Barokah Shop product type and the optimization of the income obtained. A linear program of simplex methods with POM-QM software is then used to obtain accurate research results. Based on the analysis results, the maximum profit per week of Barokah Meatball Shop is IDR 2,700,000, which is six times the production of Mercon meatballs. The calculation results show that the optimal meatball production is to focus on Mercon meatball production rather than other meatballs. The results of this study can be used as a decision-making consideration related to production problems to get optimal profits.
... Literature suggests that legitimacy theory (Deegan, 2002;Patten & Crampton, 2004;Branco & Rodrigues, 2006;Reverte, 2009) stakeholder theory ( Roberts, 1992;Donaldson & Preston, 1995;Branco & Rodrigues, 2008;Dyduch & Krasodomska, 2017), agency theory (Jensen & Meckling, 1976;Ben-Amar & Mcllkenny, 2015) and signalling theory (Ross, 1977;Trueman, 1986;Morris,1987;Shi, Kim, & Magnan, 2014), non-proprietary costs hypothesis (Dye, 1985;Dye, 1986;Prencipe, 2004), resource dependency theory (Pfeffer,1972;Hillman, Canella, & Paetzold, 2000), shareholder wealth maximisation hypothesis (Jensen, 2002;Sundaram and Inkpen, 2004) and resource-based view of the firm and competitive advantage (Wernerfelt, 1984;Campbell, Craven, & Shrives, 2003;Branco & Rodrigues, 2006;O'Connor & Spangenberg, 2008) may provide the theoretical framework necessary to model CSRVD. The differentials in CSRVD may be attributed to the presence of firm-specific resources that are valuable, rare, inimitable and non-substitutable (VRIN). ...
This study extends the literature on the determinants of voluntary disclosure of corporate social responsibility (CSR) in a sample of 61 annual reports from the Zimbabwe Stock Exchange for the year ended 31 December 2020. The purpose of the study is to determine why firms voluntarily disclose CSR and whether corporate governance mechanisms have an impact on firms’ disclosure policy. An unweighted disclosure index consisting of 30 corporate social responsibility attributes was developed; using content analysis to determine the level of corporate social responsibility disclosure. The results show that corporate social responsibility disclosure is low, with the most corporate social responsibility information disclosed being community involvement disclosure (40%), followed by environmental disclosure (30%), products and consumer information disclosure (29%), and human resources disclosure (28%). In addition, using multiple regression analysis and after accounting for size, leverage, profitability and industry, the findings indicate that board independence and board of directors’ qualifications have a significant positive influence on corporate social responsibility disclosure whereas ownership concentration was found to be insignificant. With the exception of profitability, all other firm characteristics, leverage, firm size and industry sector were positive and significant in explaining the variation in corporate social responsibility disclosure. It appears that profitable firms are not motivated to increase corporate social responsibility disclosure. This may be consistent with the shareholder wealth maximization approach which renders corporate social responsibility disclosures as less important. Financial markets in Zimbabwe may not be sufficiently efficient in penalizing firms for incomplete corporate social responsibility disclosure and that regulators may need to mandate such disclosures if information asymmetry is to be reduced and market efficiency enhanced.
... One strand of literature supports the proposition that capital markets do not pay to be green because environmental expenditures may be strongly associated with agency costs (Lyon et al., 2013;Moss et al., 2023). In particular, research rooted in neoclassical economics has argued that CSR or ESG unnecessarily increases firms' costs and puts them at a competitive disadvantage against their competitors (Jensen, 2002;Tang et al., 2015). The issue of greenwashing presents a significant concern in this context. ...
We investigate the effect of government-initiated enterprise environmental credit ratings on firms' bank loans. While prior research indicates that companies with superior environmental performance tend to secure more bank loans, it is crucial to acknowledge that these performance metrics predominantly rely on voluntary corporate social responsibility or environmental, social, and governance disclosures made by the firms themselves or evaluated by third-party agencies. Consequently, the evaluation results could be biased due to incomplete information disclosure, methodologies, or systems, raising concerns among scholars about potential "greenwashing" or symbolic environmental actions. In contrast, we employ a dataset comprising 27,388 observations from 2009 to 2021, applying propensity score matching and a time-varying difference-indifference model to better discern the relationship between firms' environmental credit ratings and their ability to obtain bank loans. Our findings highlight that firms participating in environmental credit evaluation can secure more bank loans compared to non-participating firms. This effect is especially pronounced in regions with advanced green finance development. Further analysis shows that non-state-owned enterprises with excellent or good environmental credit ratings receive more loans, thus mitigating ownership bias in loan distribution. Overall, our results demonstrate that mandatory government environmental credit ratings mitigate information asymmetry by enabling lenders to better understand firms' environmental information.
... It is key to consider if environmental accounting practices generate benefits to sustain the business entity. That is to say, whether investing in environmental conservation improves profitability, which Jensen (2002) considers the core objective of every firm? The extent to which environmental costs affect the profitability of a selected Nigerian extractive firm calls for empirical investigation, which is the aim of this present study. ...
Balancing the mix between environmental conservation and profit maximization has left many extractive firms causing serious damage to the ecosystem. As a result, this study examined the relationship between environmental costs and the profitability of Nigerian extractive firms. The audited financial reports of eighteen (18) extractive firms listed on the Nigerian Exchange Group (NGX) were used to obtain secondary data. Time series data for eleven (11) years spanning 2010-2020 were extracted and the data were analyzed using Pearson's pairwise correlation matrix. Results showed that there is a positive and significant relationship between ROCE and ERC (p = 0.001) and SC (p = 0.001). EPS has a positive and significant relationship with R&DC (p = 0.001), while Tobin's Q has a positive and significant relationship with BAC (p = 0.001), SC (p = 0.001), and ERC (p = 0.001). The study concluded that environmental cost variables such as administrative costs, business area costs, and environmental remediation significantly influence the profitability of the extractive industry in Nigeria. It is therefore recommended that management of firms within the extractive industry channel efforts towards engaging in adequate environmental spending as a way of increasing stakeholders' trust. This will in turn lead to greater profitability.
... Another interpretation is that the wrong biases were examined. An alternative explanation for why organizations tended towards Theory E-goals is that it helped prioritize between alternatives (Jensen, 2000(Jensen, , 2002Sundaram & Inkpen, 2004 ...
... Various researchers (e.g., Jensen, 2002) have argued that resource distribution decisions should be only about shareholder wealth maximization. The postulation is that by concentrating on profit maximization, all stakeholders benefit. ...
Past research and theory on a company's handling of big data has focused either on the external stakeholder side or corporate ends for internal stakeholders. In this paper we present a new theoretical model that extends previous theory and research done in the area of big data, ethics and external stakeholders (i.e., customers) to the realm of internal stakeholder perceptions (i.e., employees). We posit that our focus on internal stakeholder outcomes better captures the multidimensionality of salient stakeholders, allowing for a more holistic corporate decision-making process consistent with current conceptions of stakeholder theory. Our model provides direction on how big data may be properly maintained from the inside out, in order to avoid negative internal stakeholder perceptions and corresponding unethical organizational behaviors.
Purpose
This study aims to examine the impact of environmental, social and governance (ESG) reporting on accruals-based earnings management (AEM) activities in Kuwait.
Design/methodology/approach
Based on a random-effects regression analysis, this study examines the relationship between sustainability reporting (SR), as determined by the intensity degree method and EM, as measured by AEM, using panel data from 37 listed Kuwaiti companies on the Kuwait Stock Exchange between 2017 and 2021.
Findings
Empirical results reveal that SR affects EM in Kuwait. It appears that socially responsible Kuwaiti firms concentrate their efforts on fostering transparency and integrity in their interactions with stakeholders rather than engaging in misleading practices.
Practical implications
This study suggests a range of practical implications in Kuwait and similar economies. The findings highlight that SR can be advantageous for individuals, policymakers and corporations by promoting positive impact, addressing sustainability targets, building stakeholder confidence, reducing the risk of exposure to environmental, social and ethical liabilities and enhancing public well-being.
Originality/value
This study creates a unique ESG data set for Kuwait, unavailable in academic research. Building upon previous study that focused only on the environmental aspect (Gerged et al. , 2020), this research, however, adopts a broader approach by investigating the overall impact of ESG reporting on EM in Kuwait, making it the first study to explore this relationship in this country.
Cambios producidos al interior de los formatos de tiendas detallistas, con respecto a las actividades de marketing
Toma de decisiones respecto a: ¿continuamos produciendo para nosotros comercializar o gracias a la mejora continua, buscamos quién requiere que elaboremos el mejor café verde y excelso tipo exportación?
La evolución de una empresa familiar a partir de estrategias efectivas en el sector retail
Experiencias exitosas de la Empresa Berlhan de Colombia SAS. Portafolio de productos para el aseo personal
Managerial economics is a distinctive branch of economics which deals with the economic problems of firms and industries and their relationship with society. There are several basic issues on which the producer will be making decisions such as what commodities it should produce, what should be the output level of each, what type of technology it should adopt, where it should produce the goods, what should be the size of the factory, what price it should charge, how much wages it should be paid, and how much it should be spent on advertisement. All such decisions endeavor to study managerial economics.
Discussions of why corporations should cultivate a diverse workforce emphasize justice- and profit-based reasons. This paper defends a distinct third rationale of legitimacy-based reasons for diversity. I articulate and defend the market power account of firm legitimacy, which holds that private firms, much like governmental institutions, have a moral obligation to justify the power they exercise over stakeholder groups when those groups lack meaningful rights of exit from their relationship with the firm. Firms can discharge this obligation by incorporating moral diversity into managerial teams that decide company policy. Moral diversity confers both epistemic and moral advantages onto teams tasked with solving complex problems that impact disparate stakeholder groups. These advantages confer proceduralist legitimacy onto implemented policies, giving impacted groups reason to accept those policies, even when those groups find those policies objectionable on other grounds.
Purpose
This paper aims to investigate the relationship between corporate tax avoidance and environmental, social and governance (ESG) performance and the moderating effect of financial constraints on the relationship between corporate tax avoidance and ESG performance.
Design/methodology/approach
The sample consists of a global data set involving 24,259 firm-year observations from 49 countries for the years 2011–2020. Corporate ESG performance was extracted from the Thomson Reuters database. The book-tax difference model was used for measuring corporate tax avoidance, while financially constrained firms were identified using the Kaplan and Zingales (1997) index.
Findings
The results show that firms with higher tax avoidance are associated with higher ESG performance, but lower ESG performance is shown for firms with higher financial constraints. The results further indicate that the positive impact of corporate tax avoidance on ESG performance becomes weaker for firms with higher financial constraints.
Practical implications
The findings imply that policymakers and regulators should focus on mechanisms to promote more internal funds to assist firms in pursuing ESG-related initiatives, such as through tax incentives. Investors should understand the “smokescreen” effect of corporate tax avoidance on ESG performance, especially for firms with financial constraints.
Originality/value
This analysis provides international evidence on the link between tax avoidance and ESG and considers the joint effect of pressures for internal funds, through tax and financing constraints, on corporate ESG performance.
Reseña de la empresa Belt Colombia. Caso de estudio y Preguntas de trabajo
Reseña de la empresa Trilladora Quindío. Caso de estudio y Preguntas de trabajo
Two crucial questions for good management and corporate governance are why companies exist and what determines and legitimates the existence of business companies. Many have offered their own versions of the answer, and, as in other chapters, we will begin with a critical analysis of the major positions that have sought to respond to the question of why companies exist. We will take from them whatever elements are compatible with a company centered on the person, with an integral vision, avoiding limiting ourselves to explanations that are strictly economical, sociological, or psychological.
The view of business has much to do with the conception of society (6.1). Radical individualism, with its atomistic view of society, understands the company as an aggregate of individuals joined by exclusively contractual bonds, or else groups of stakeholders linked by their respective interests. At the other extreme, there are political philosophies that see the business as a homogenous whole, into which persons all but disappear. Classical liberalism sees the firm simply as a property which contracts and demands fiduciary duties from its managers, ignoring it as a social entity in which conscious, free, and sociable beings associate with one another, joined not merely by contracts or self-interest, but also by their relationality and social nature. They are persons capable of cooperating and creating communities for the sake of some common end, the realization of which redounds to the good of all the persons involved in the company, not only the “property owners.”
Returning to the question of why a business exists in the first place, it is argued that one of the most complete accounts of why any reality exists is Aristotle’s theory of the four causes, or “explanations,” called by him the material, formal, efficient, and final causes. However, this method has been largely neglected; here we seek to recover it to interpret the company from a humanist person-centered perspective.
In the Aristotelian approach, the material cause refers to the basic elements that constitute the business: these include persons and resources. From here we derive related practical demands: on the one hand, with the dignity and human development of persons for work in the business, and, on the other, of the right to property and its social function.
The formal cause structures the material cause. It is argued that the formal cause of the company is the existing cooperative relationships, which transforms persons in a social unity, endowed with resources, under an authority, pursuing the business primary purpose related to the production and/or distribution of products and value creation. This unity of people with resources is an organization, a social institution, and a community of persons. In the formal cause must be included several groups of people (sometimes a single person) interacting with the company and with a relevant role in the company activity. The significance of these groups of people depends on each situation but generally includes employees, shareholders, customers, suppliers, local communities where the company operates or broader communities, government and regulatory bodies, and non-governmental organizations (NGOs). These groups can be called “relationholders,” rather than the usual term of “stakeholders,” because they do not only have a “stake,” but a relationship, which often is much more than a stake.
The efficient cause of the company refers to the activity of those agents who, in an immediate way, make the existence of the company possible. This cause may be identified, in the first place, with people who are working in the company, including operative, managerial, and governance work, along with the activity of people (stockholders, family owners, investors) who provide material means (capital) for the work.
The final cause is the company’s purpose, which expresses that which gives meaning to the business company as something distinct from other social institutions or communities – that which pinpoints the business’s specific contribution to the common good. This purpose is specified through a double mission: an external, regarding direct impacts of the company on society and internal one, which includes effect inside of the company.
The chapter concludes emphasizing the necessity of further humanistic person-centered research on management, governance, and leadership and for a deeper understanding the company’s role in society and within the economic system.
The study of corporate governance and banking system stability in Nigeria became necessary as banks are failing, acquired and/or merged from time to time. The reason behind the failure or merger/acquisition may not be far from mismanagement and abuse of trust which lead to erosion of asset values of the banks involved as a result of non-performing loans. The study adopted ex post facto research design and used annual time series for the period ranging between 2001 and 2022. Growth rate of banks' total assets (GTA) was used as dependent variable and proxy for corporate governance while loans-to-deposit ratio (LDR), non-performing loan ratio (NPLR), loans loss provision (LLP) and liquidity ratio (LIQR) were used as bank stability variables. Results show that LDR and LIQR have positive relationship with corporate governance whereas LLP and NPLR exhibit negative relationship with corporate governance. It is recommended that Banks management should be transparent and ethical in all their dealings in order to attain increase in value and wealth maximization for the owners of the banks. Besides, banks should work in consonant with policies and directives of the regulators from time to time to enhance the health of the banks and continuous stakeholders' welfare.
Over the last few years, there has been a marked increase in the number of corporate scandals due to accounting policy manipulation, amongst other factors. As a result, it is crucial to question how these items went undetected for so long. This study proposes that corporate sustainability disclosures are being used as a tool to distract users of financial information from financial statement manipulation. This study examines the relationship between environmental, social and governance (ESG) scores, a sustainability metric, and accruals-based earnings management in South Africa to investigate this issue. It further examines the relationship between each of the individual pillars of the score (environmental, social and governance) and accruals-based earnings management. The South African context is important as this relationship has yet to be considered and may provide important insight to stakeholders.
The study utilised panel data regression models to analyse 27 companies listed on the Johannesburg Stock Exchange spanning ten years, representing 270 firm-year observations. The independent variable, the ESG score, was obtained via the Bloomberg Database, and the dependent variable, accruals-based earnings management, was measured using the Modified Jones model incorporating return on assets. This method is consistent with similar studies performed in different geographical locations.
The findings indicate a negative relationship between total ESG and accruals-based earnings management. Similarly, there is a negative relationship between the social component of the ESG score and accruals-based earnings management. This suggests that those charged with governance are not using ESG disclosures to cover up instances of earnings management activities but rather providing the disclosure as it is beneficial to the firm. The results of this study highlight the relationship between ESG and earnings management. Therefore allowing stakeholders to consider this when interpreting both financial and non-financial information and how much reliance should be placed on the information. In addition, it provides insight to regulators that can be considered when proposing laws and regulations and assessing the effectiveness of the proposal.
With the investors' increased appetite to quench their demand for businesses' CSR activities, accounting/finance literature has shown a particular interest in investigating how CSR disclosure affects earnings quality. The interest in ethical accounting has leveled up since accounting scandals (Enron, WorldCom, etc.), has further been intensified after blaming falsified accounting for promoting the financial crisis of 2007-2008, and has culminated in the light of exacerbated climate change and societal inequality challenges. If for many years businesses had to only showcase their financial performance, what is on stake now is to reveal how responsible, sustainable, and ethical firms are towards the planet and society. In the attempt of investigating the relationship between the levels of CSR disclosure and ethical accounting choices, scholars arrived at clearly juxtaposed results.
This paper investigates the relationship between Environmental, Social, and Gover-nance (ESG) controversies and firm performance, examining the moderating influences of corporate governance structures and ESG practices. Utilizing quantitative methods, we analyze data from 5360 firm-year observations. Our findings reveal a significant negative relation between ESG controversies and firm performance. However , well-defined corporate governance frameworks and internal ESG strategies mitigate these adverse impacts and can transform these controversies into growth opportunities and reputation enhancement. A comparative analysis involving the United Kingdom and other European Union nations highlights the influence of geographical and regulatory contexts in shaping this dynamic. These results offer valuable insights for policymakers, corporate strategists, and investors, emphasizing the role of governance in navigating ESG controversies and enhancing firm resilience and adaptability. The study contributes to the sustainability field by providing a nuanced understanding of the interaction between ESG controversies, corporate governance, and firm performance. K E Y W O R D S board
One of the key components of corporate governance frameworks, the audit committee is a potent instrument for controlling and supervising earning management. It might significantly affect how decisions about internal firm-board monitoring are made. The purpose of this study was to investigate the impact of audit committee features on the earning management of insurance businesses in Ethiopia from 2015 to 2022. The impact of audit committee features on earning management was studied using the generalized moment (GMM) model. According to the study, the size of the audit committee (ACS) has a significant and positive impact on the insurance companies’ earnings management in Ethiopia. Additionally, the study discovered that the audit committee’s independence (ACI), expertise (ACE), meeting (ACM), and gender (ACG) all have a significant and positive impact on the earning management of insurance companies in Ethiopia. Thus, the study came to the conclusion that all audit committee characteristic measures have a significant impact on the discretionary accrual (DA)-measured earning management of insurance businesses in Ethiopia. Therefore, the internal governance mechanisms should be strengthened and improved by insurance company policymakers in Ethiopia.
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