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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 corporate productivity and efficiency, social welfare, and the accountability of managers and directors. The author argues that 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 maximizes its total market value.
The main contender to value maximization as the corporate objective is stakeholder theory, which argues that managers should make decisions so as to take account of the interests of all stakeholders in a firm, including not only financial claimants, but also employees, customers, communities, and governmental officials. Because the advocates of stakeholder theory refuse to specify how to make the necessary tradeoffs among these competing interests, they 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.
In clarifying the proper relation between value maximization and stakeholder theory, the author introduces a somewhat new corporate objective called “enlightened value maximization.” Enlightened value maximization uses much of the structure of stakeholder theory—notably the need to consider the interests of all corporate stakeholders—while continuing to posit maximization of long‐run firm value as the criterion for making the necessary tradeoffs among stakeholders.
The paper comes to similar conclusions about the Balanced Scorecard, which is described as the managerial equivalent of stakeholder theory. Although the Balanced Scorecard can add value by helping managers better understand the drivers of shareholder value, it should not be used as a performance measurement and incentive compensation system because it fails to provide a single valued score, a clear way of distinguishing superior from substandard performance.
... In the last twenty years, several financial crisis and corporate failures have raised a growing economic, political, social, and academic debate on what should be the objective of firms (Di Carlo 2020; Fontrodona and Sison 2006;Freeman et al. 2004;Hart and Zingales 2017;Jensen 2001;Keay 2008;Sundaram and Inkpen 2004), questioning their role in society and the model of capitalism (Barton and Wiseman 2014;Bower et al. 2011;Canals 2010;Krugman 2009;Lin-Hi and Blumberg 2012). This debate, which might initially appear as an academic exercise, extends significantly its implications also to practical realms (Paine and Srinivasan 2019). ...
... normative approach, Phillips et al. 2003), compared to those who believe it is the best way to create value for shareholders in the long term (i.e. instrumental approach, Donaldson and Preston 1995;Jensen 2001). Both approaches are based on the idea of firm as an artificial entity, or rather an instrument used by stakeholders (normative) or by shareholders (instrumental) to pursue their own interests (Melé 2009). ...
... Thus, shareholders are placed on an equal footing with other stakeholders: no stakeholder can be considered a principal with higher authority, and the managers' duty is referred to all stakeholders. In contrast, the instrumental approach (Donaldson and Preston 1995;Jensen 2001) suggests paying attention to all stakeholders because it is the most convenient thing to do in the interest of the shareholders (Plender 1997). ...
The fight against COVID-19 has been a significant global challenge with profound health, economic and social consequences, launching a VUCA (‘volatility’, ‘uncertainty’, ‘complexity’, ‘ambiguity’) era. The crisis highlighted resource shortages and uncertainty, prompting a reevaluation of the role of firms in society. Abandoning the guise of a mere profit generating tool, firms emerged as essential social actors, able to provide crucial resources during economic and relational famine. This shift determined a rethinking of capitalism, where the challenge was not just profit maximization for shareholders, but the inability to generate profits or to change the way to generate profits. To overcome the crisis, a common organizing approach was developed, enabling communities of people to work together for the common good. Analyzing the literature on corporate finalism, the paper explores how the fight against COVID-19 has reshaped the conception of firms as real entities dedicated to promoting the common good of stakeholders and society at large. The result is a more holistic model of firm and human being, aligned to the personalist principle, which overcomes both shareholder and stakeholder theories. Indeed, while these approaches have neglected crucial individual and corporate behavior to counteract the pandemic, the proposed theory seems to better address these issues, guaranteeing durability and growth during a profound economic and social crisis, such as COVID-19. Thus, the discussion contributes to the ongoing debate on the corporate purpose and provides useful insights for managers and corporate governance bodies, inspiring a more virtuous form of capitalism that promises a better future.
... But the road to teaching responsible management, which seeks to develop people who will help their organisations create inclusive prosperity within planetary boundaries, is long (Haertle et al., 2017). A major obstacle is the leading paradigm in academic finance: the shareholder value paradigm, which says that the objective of the firm is to maximise the financial value of the firm for its shareholders (Jensen, 2002). The shareholder paradigm states explicitly that "Resolving externality and monopoly problems is the legitimate domain of the government in its rule-setting function" (Jensen, 2002, p. 246). ...
... The shareholder value paradigm thus does not, and cannot, accommodate a broader perspective on value. Under the shareholder model sustainability efforts are only permissible as far as they are instrumental to 'enlightened shareholder value maximisation' (Jensen, 2002). Otherwise, these efforts are seen as costly and should not be undertakennot even if they help avoid massive cost to This article is part of a special issue entitled: Creative teaching methods published in The International Journal of Management Education. ...
... A slightly more positive variant of the shareholder value approach is the refined shareholder value approach, also called enlightened value maximisation by Jensen (2002). In this refined version, companies may put systems in place for energy and emissions management, sustainable purchasing, IT, building and infrastructure to enhanced environmental standards, and all kinds of diversity in employment. ...
The dominant shareholder value paradigm in academic finance is a major obstacle to responsible management. The methodology for responsible management education identifies three aspects to address: building sustainability knowledge, incorporating sustainability in an integrated way, and developing practical applications. Applying this methodology to academic finance education, and based on our own teaching experience, we propose three shifts to the current approach. First, courses should start with sustainable development as the goal, i.e. finance as a means instead of finance for the sake of shareholder value maximisation. Second, courses should offer an alternative perspective to shareholder value, not just slight modifications. We suggest using the integrated value paradigm, which estimates not only financial value, but also social and environmental value, which tends to be an eye-opener to students. Third, practical learning tools could enhance the interdisciplinary learning experience of students. To achieve these shifts, business schools need to show leadership with the right tone and incentives from the top.
... The first is based on Jensen and Meckling's (1976) agency theory, and Barnea and Rubin's (2010) claim CSR is a principal-agent relationship between managers and shareholders. The second is conflict resolution based on stakeholder theory (Harjoto and Jo, 2011;Jensen, 2002), where corporations have the responsibility to satisfy all the stakeholders. Proponents of CSR claim that corporations are required to take into consideration the interests of both investing and noninvesting stakeholders who can affect the operations of business in today's world. ...
... Bhandari and Javakhadze (2017) claim that CSR efforts have a detrimental influence on capital allocation efficiency, which leads to lower company performance. Furthermore, engagement in CSR initiatives takes time and diverts managers' attention away from their primary responsibilities (Jensen, 2002), thus, causing financial distress and diminishing firm value. Based on the preceding discussion, we conclude that the quality of CG strongly moderates the relationship between CSR and business value. ...
... First, well-governed enterprises are more socially responsible and, hence, CSR performance leads to improved shareholder value (Farooq et al., 2023a(Farooq et al., , 2023b. This justification backs up the conflict resolution hypothesis and the stakeholder perspective on CSR, which contend that in the presence of an efficient CG mechanism, managers implementing CSR initiatives resolve disputes between stakeholders, ultimately boosting shareholder wealth (Jensen, 2002;Scherer and Palazzo, 2007). A good governance framework increases investor trust, lowers the cost of capital and ensures easy access to money, all of which increase firm value. ...
Purpose
Corporate social responsibility (CSR) has gained tremendous importance after several corporate scandals, financial crises and the rise of the hyper-competitive world. Firms must address multiple stakeholders’ interests to increase firm value. This study aims to investigate the effect of CSR on firm value. This study also examines the mediating role of enterprise risk management (ERM) and the moderating influence of corporate governance (CG) in this CSR-firm value relationship.
Design/methodology/approach
The sample of the study comprises 119 Pakistan Stock Exchange (PSX) listed firms and the study covers the period from 2010 to 2021. The corporate social responsibility performance has been quantified across five dimensions. These aspects are product, environment, employee relations, diversity and community. Four proxies i.e. strategy, operation, reporting and compliance, have been used to measure ERM. The governance quality of the sample companies was evaluated using the governance index, which included 29 governance provisions. The authors used the dynamic panel data technique (system-GMM) is used to achieve the objectives of the study. Furthermore, a firm’s engagement in CSR activities can also be measured through a multinational financial approach to check the robustness of the result.
Findings
Based on the regression analysis, the authors discovered that CSR was positively connected with firm value, validating the stakeholder view of CSR. Furthermore, following Baron and Kenny’s (1986) mediation technique, the findings confirm that ERM mediates this association. These results are robust by using the bootstrapping tests by Preacher and Hayes (2004). Furthermore, the result shows that corporate governance (CG) is positively connected with firm performance, and this relationship is strengthened in the presence of an effective governance system in the organization.
Practical implications
This study provides useful insights to regulators, investors and policymakers to consider CSR as a value-enhancing factor and encourage the development of enterprise risk management and compliance with CG mechanisms to improve firm value.
Originality/value
The presented analysis strengthens the existing CSR–firm value relationship by analyzing the mediating and moderating roles of ERM and CG, which have not yet been tested, particularly in the context of Pakistan.
... The ESG investment concept is strongly aligned with the needs of high-quality economic development and the spirit of the 20th Report, which is bound to receive considerable, continuous attention from the academic and 2 practical circles. By the end of 2022, more than 5,300 institutions had signed the United Nations Principles for Responsible Investment (UNPRI), and the assets under the management of signatories exceeded $120 trillion 1 .Although ESG investment started late in China, its rapid growth in scale and quantity has attracted the world's attention. In 2022, China's ESG fund management scale had reached 434.634 billion yuan 2 . ...
... According to neoclassical theory, ESG performance is contrary to traditional value creation because its negative externalities may inhibit the realization of shareholder value maximization and the operational efficiency of enterprises (Jensen, 2002;Benabou & Tirole, 2010) [1,2]. However, in recent years, numerous studies have found that good ESG performance not only helps enterprises win the trust of the public, financial institutions and suppliers but also helps enterprises reduce their operating costs, mitigate their financial risks, stimulate their innovation momentum, and thus improve their operating efficiency and long-term value (Ghoul et al., 2018;Anwar et al., 2020;Broadstock et al., 2021;Houston et al., 2022) [3][4][5][6]. ...
... According to neoclassical theory, ESG performance is contrary to traditional value creation because its negative externalities may inhibit the realization of shareholder value maximization and the operational efficiency of enterprises (Jensen, 2002;Benabou & Tirole, 2010) [1,2]. However, in recent years, numerous studies have found that good ESG performance not only helps enterprises win the trust of the public, financial institutions and suppliers but also helps enterprises reduce their operating costs, mitigate their financial risks, stimulate their innovation momentum, and thus improve their operating efficiency and long-term value (Ghoul et al., 2018;Anwar et al., 2020;Broadstock et al., 2021;Houston et al., 2022) [3][4][5][6]. ...
Under the new pattern of “double carbon” development, good ESG performance is the best way to promote the sustainable development of enterprises, and the ESG investment strategies are directly affected by the strategic vision of managers. Based on the upper echelons theory and stakeholder theory, this paper takes Chinese A-share listed companies from 2011 to 2022 as samples to empirically analyze the impact of managerial myopia on corporate ESG performance. The results show that managerial myopia significantly inhibits corporate ESG performance, mainly by inhibiting corporate green investment and green innovation sustainability. Furthermore, for state-owned enterprises (SOE), heavy polluting enterprises (HPE) and non-high-tech enterprises, the inhibitory effect of manager myopia on ESG performance is stronger. When the enterprise is in the growth stage, the above inhibition effect is more severe. For external governance, the greater the analyst attention and public environmental attention are, the more conducive they are to alleviating the restraining effect of managerial myopia on enterprise ESG performance. Therefore, effectively improving the time cognition level of managers and strengthening external supervision have become important measures for comprehensively optimizing the ESG performance.
... "ha a megvilágított érték maximalizációt hosszú távú érték maximalizációként specifikáljuk … akkor azt jelöljük vállalati célként is" (Jensen, 2002: 235). Jensen (2002) új koncepciójában az egész vállalat értékének maximalizálására kerül sor, beleértve a részvénytőkét, a kölcsöntőkét, az elsőbbségi részvényeket, a garanciákat, s ez megköveteli, hogy jó kapcsolatok jöjjenek létre az összes alkotóelem között, ámbár egyetlen alkotóelem kapcsán se biztosítson "lehetőleg teljes megelégedettséget, ha a vállalat virágzik és túlél" (Jensen, 2002: 246 A fentebb leírtak jól mutatják, hogy az ösztönzési princípium tekintetében különböző megfontolások vannak azzal összefüggésben, hogy vajon a vállalatnak a részvénytulajdonosi érték maximalizációját kell-e követni, vagy az érdekhordozók érdekeinek preferálása legyen a vállalatot kormányzó cél. A választás azért nehéz, mert még ma is széles körben hivatkoznak Friedman alapvetésére, mint amennyire a részvénytulajdonosi érték maximalizációt teszik felelőssé a pénzmenedzseri kapitalizmus torzulásain keresztül a gazdaság tevékenységének és válsághajlamának fokozódásáért. ...
... ).Jensen (2002) perspektívája eltávolodást jelent a részvénytulajdonosi gazdagság maximalizáció felől, és közeledést az érdekhordozói maximalizáció szélesebb víziója felé.Jensen (2002) új közelítése árnyaltabb volt a Friedman doktrínában foglaltaknál. Jensen (2002) részvénytulajdonosi elsődlegességen a "teljes vállalati érték maximalizálásának" pontosabb fogalmát értette. ...
... ).Jensen (2002) perspektívája eltávolodást jelent a részvénytulajdonosi gazdagság maximalizáció felől, és közeledést az érdekhordozói maximalizáció szélesebb víziója felé.Jensen (2002) új közelítése árnyaltabb volt a Friedman doktrínában foglaltaknál. Jensen (2002) részvénytulajdonosi elsődlegességen a "teljes vállalati érték maximalizálásának" pontosabb fogalmát értette. Jensen (2002) azonosnak tekinti a vállalati értéket a vállalati profitáram hosszú távú piaci értékével, s jórészt figyelmen kívül hagyja ama tény im ...
Over the past few decades, the financial sector in advanced economies has undergone profound changes, and this is particularly true for the US financial economy. This paper focuses on aspects of this evolution that are closely related to distortions in the investment system. The line of thought starts from the maximisation of shareholder value, which was the ideological basis for the split between the real economy and the financial sector. The paper provides a multifaceted analysis of the impact of financial markets on investment behaviour, the decline in real capital investment, the adverse consequences of value extraction, and the adverse effects of share buybacks. As long as the gap between the cost of capital and the minimum expected rate of return is not narrowed, the position of real capital investment will not improve.
... In sum, our findings indicate that increased vulnerability to takeovers relates with heightened social commitments by firms, aligning with the stakeholder hypothesis (Jensen, 2001) and the good management hypothesis (Waddock & Graves, 1997). According to these perspectives, the primary objective of a firm is the maximization of stakeholder interests rather than stockholders' value maximization. ...
... Second, stakeholder theory enhances the concept of maximizing shareholder's wealth by satisfying or balancing benefits among all parties, not only shareholders, related to a company including creditors, employees, clients, communities, society, regulators, and government (Jensen, 2001). The firm's objective of stakeholder maximization is positively aligned with the firm values (Campbell, 1997;Freeman et al., 2007). ...
Understanding the dynamics between external corporate governance mechanisms and social engagement offers insights into how corporate strategies towards social capital are shaped. We explore the impact of hostile takeover threats on corporate social engagement by utilizing a measure of takeover vulnerability. This allows for a detailed examination of how exposure to takeover threats influences firms' engagement in social engagement initiatives. Our analysis reveals a positive and causal relation between the degree of takeover threats and the level of social commitments in firms, suggesting that the presence of hostile takeover threats enhances corporate social responsibility as a means of external governance and reduces agency costs. The findings support the hypothesis that the threat of hostile takeovers prompts firms to invest more in social commitments, potentially as a strategic defense mechanism.
... As a result, business is oriented towards shareholder value maximization, individual motivation is explained by income maximization, and economic success is de ned by societal-level GDP increases (Pirson & Lawrence, 2010). Utilitarian arguments have been used to legitimize this theoretical orientation as a way to maximize societal bene ts (Jensen, 2002). In turn, many scholars have criticized current market capitalism for decreasing the societal legitimacy of business (Scherer, Palazzo, & Seidl, 2013) and ultimately jeopardizing human survival (Hart, 2005;Senge, 2010). ...
... An optimal way to ensure utility maximization is for organizational leadership to focus only on shareholder interest. In his refutation of stakeholder theory, Jensen (2002) argues that there has to be a single objective function for the rm; otherwise, one could not purposefully manage it. He bases this claim on assumptions of economic theory, which posit that pro t maximization strategies are required in situations where there are no externalities. ...
... Założenie o dążeniu przedsiębiorców do maksymalizacji zysku ma swoje podłoże w klasycznej teorii przedsiębiorstwa. Zgodnie z tym podejściem, jeżeli każdy podmiot na rynku dąży do własnych celów, to gospodarka się rozwija i rośnie dobrobyt społeczny [Jensen, 2002], a problemy społeczne to domena państwa [Friedman, 1970]. Jednakże oprócz orientacji na wyniki finansowe rozwijają się koncepcje zorientowane na otoczenie organizacji. ...
... W odniesieniu do dylematu eksploracja vs eksploatacja może to oznaczać, że: "W jednym i drugim obszarze pandemia spowodowała jeszcze głębsze myślenie (…) zarówno, żeby szybciej i dynamiczniej poszukiwać nowych rynków i produktów czy innowacji (…), ale też tego, że społeczeństwo będzie miało trochę mniej pieniędzy (…) i szuka optymalizacji. Ten produkt musi być inny i tańszy -jedno i drugie pewnie" [11,142]. "Zależy nam na doskonaleniu tego co już mamy (…), ale jednocześnie (na) poszukiwaniu nowych obszarów działalności, nowych wyzwań" [3,158]; "doskonalimy produkty, ale wdrażamy innowacje i jesteśmy nastawieni na zmianę" [produkty, 6,102]. Równoczesne pogłębianie obu opcji w odniesieniu do dylematu współpraca vs konkurencja oznacza, że "I jedno, i drugie się wzmocniło. ...
The aim of the study is to identify strategists’ approaches to paradoxes associated with strategic management in organizations under conditions of increased uncertainty. In pursuit of this goal, it is crucial to both identify strategists’ opinions on paradoxes and explore their experiences in applying them in the practice of strategic management. The research was conducted using a qualitative approach, employing in-depth interviews with strategists (n = 18). The research findings indicate that, in conditions of heightened uncertainty, strategists employ solutions and practices characteristic of a paradoxical approach. This reflects a significant shift in the application of paradoxical perspectives under conditions of high environmental uncertainty, triggered by the COVID-19 pandemic and its consequences.
... Additionally, Preston and O'Bannon (1997), and Ho and Taylor (2007) found that practicing corporate social responsibility had a negative impact on financial performance. However, Jensen (2002) argued that companies practicing sustainability in their management would decrease the objective of firm value maximisation. Conversely, Montabon et al. (2007) demonstrated that numerous company performance measurements are favourably correlated with a variety of environmental management practices (EMPs). ...
... This result could be explained by the agency theory as firms' management try to increase the return on equity shareholders by any means that negatively affects SDGs disclosure. This outcome is in line with Jensen's (2002) claim that businesses engaging in sustainability in their management would decrease the goal of firm value maximisation. ...
... According to this theory, firms may allocate excessive resources and managerial attention to social issues, exacerbating the agency problem and ultimately reducing shareholder wealth. This perspective is supported by prior literature, which highlight a negative link between CSR and financial performance, as additional social programs often incur higher costs (Jensen, 2010;McWilliams & Siegel, 1997). Furthermore, the adverse effect of ESG on firm value is consistent with Giglio et al. (2021), who argue that traditional investment motives remains dominant in portfolio allocation decision, limiting the financial appeal of excessive ESG spending. ...
... This suggests that managers are expected to consider the interests and influences of people who are either affected or may be affected by a firm's policies and operations (Frederick et a1.;1992cited in Fadun, 2013. Similarly, Jensen (2001) affirms that managers should pursue objectives that would promote the long-term value of the firm by protecting the interest of all stakeholders. ...
In Nigeria, particularly in the insurance industry, the issue of corporate governance practices came into life with the increasing trend of frauds, financial scandals, bankruptcies, non-claims settlements, and other unethical related practices. Therefore, the intensity at which corporate governance practices affect firm's performance remains unclear because of the predominant theoretical perspective in explaining the positive implications of corporate governance practices on financial performance. Thus, the research objective of this study is to evaluate the effect of corporate governance practices on financial performance with specific reference to some selected insurance companies in Nigeria. The study adopted ex-post facto research designs. Nine insurance firms were purposively selected to be included in this study. The hypothesis was tested using secondary data from annual reports of selected insurance companies. The test of the hypothesis revealed R 2 of 0.529. This depicted a significant influence of independent variable (corporate governance practices) on the dependent variable (profitability) and the p-value < 0.05. The study recommended among others that there should be corporate accountability movement in the insurance industry through well framed mandatory corporate reporting covering all aspects of social environment and economic performance. This will be pursued logically by having a good corporate code of governance to give direction.
... Assim, enquanto a teoria da maximização do valor tem fundamentos econômicos, a teoria dos stakeholders tem raízes na sociologia e no comportamento organizacional (JENSEN, 2001). Porém, em perspectiva abrangente, esse aparente antagonismo deve ser convertido em ações que minimizem conflitos e aumentem a sinergia para que os resultados sejam obtidos (HUANG; KUNG, 2010) nesse ambiente institucional diverso e dinâmico. ...
Introdução Para além do modelo econômico tradicional, não somente critérios racionais de escolha devem ser contabilizados para que as empresas alcancem e sustentem sua vantagem competitiva, mas também as pressões decorrentes do ambiente institucional. Nessa relação, os stakeholders devem ser considerados, e o aparente antagonismo entre a maximização dos lucros e a Teoria dos Stakeholders deve ser convertido em ações que minimizem conflitos e aumentem a sinergia para que os resultados sejam obtidos. Problema de Pesquisa e Objetivo No cenário institucional, esta pesquisa encontrou a sua oportunidade e relevância buscando responder à seguinte problemática: "O que revelam os estudos recentes que analisaram a relação entre a indústria e o gerenciamento de seus stakeholders? Para responder a essa pergunta central, foram elencadas três questões acessórias: (i) "Qual tipo de indústria e quais stakeholders foram estudados?; (ii) "Qual base teórica foi adotada?"; (iii) "Quais foram os principais resultados desses estudos?". Fundamentação Teórica A pesquisa teve como base a Teoria dos Stakeholders, compreendendo o conceito de Freeman (1984), com referência aos grupos sem o apoio dos quais a organização deixaria de existir. Para a categorização da teoria, recorreu-se a Donaldson e Preston (1995). Também foi abordada a classificação de Clarkson (1995), que dividiu os stakeholders em primários e secundários, e de Mitchell, Agle e Wood (1997), que apresentaram os grupos de stakeholders de acordo com os atributos de poder para influenciar a empresa, legitimidade da relação com a empresa e urgência de reivindicação sobre a empresa. Metodologia Foi realizada uma Revisão Sistemática da Literatura (RSL), considerando todas as bases de dados passíveis de acesso pelo Portal de Periódicos CAPES e de exportação de dados para o software EndNote®, sendo artigos revisados por pares, nas línguas inglesa, espanhola e portuguesa, com acesso aberto, publicados nos últimos 05 (cinco) anos. Os 181 artigos iniciais foram submetidos a critérios de exclusão, restando 18 artigos que foram analisados em profundidade. Para a obtenção de elementos ilustrativos, como nuvem de palavras e painel temático, recorreu-se ao software Bibliometrix/R. Análise dos Resultados Verificou-se que foram analisadas as indústrias cervejeira, de mineração, energia, alimentícia, marítima, eletrônica, construção, vestuário, óleo de palma, vinho, cacau verde e biomassa, com maior número de trabalhos na indústria de mineração, energia e construção. Quanto aos stakeholders estudados, não se observou uma classificação padrão ou rigorosa, com base em algum parâmetro ou autor. Estudos em indústrias consideradas mais sensíveis socioambientalmente envolveram um leque maior de stakeholders. Os achados apontam para uma gama de oportunidades de estudos na área socioambiental. Conclusão As oportunidades de pesquisa incluem uma maior exploração do relacionamento das indústrias expostas às pressões socioambientais com seus stakeholders, com aferição do real impacto das ações divulgadas. A despeito das limitações inerentes a uma RSL, aspira-se que, para além das contribuições teóricas, os achados teóricos cheguem ao mundo corporativo traduzidos em ações práticas que de fato busquem o alinhamento sinérgico positivo entre as organizações e seus stakeholders. Referências Bibliográficas CLARKSON, M. E. A stakeholder framework for analyzing and evaluating corporate social performance.
... Over time, as the market corrects these errors, investors in sustainable assets may experience superior returns (Borgers et al., 2013). This hypothesis is also consistent with stakeholder theory, which posits that addressing stakeholders' needs can foster loyalty, enhance brand image, and better anticipate regulatory changes, ultimately improving financial performance (Jensen, 2010). ...
Amid growing concerns about climate change and sustainable development, this study examines the performance of green equity indices versus conventional indices in various market regimes from 2002 to 2024. By incorporating both developed and emerging markets and utilizing the Markov regime-switching model, this paper offers a dynamic perspective on index performance across varying market regimes. The findings reveal that green indices in developed markets demonstrate resilience, with lower or comparable volatility, less negative returns during downturns, and longer durations in both bearish and bullish regimes compared to conventional indices. In developing markets, green indices generally exhibit higher volatility and mixed performance. This research highlights the importance of tailoring sustainable investment strategies and policies to regional market condition, enriching the understanding of the global sustainable investment landscape. This study emphasizes the potential of green investments to enhance financial stability, corporate innovation, and climate governance practices.
... Maximising the value of a company is increasingly the main goal of its activities. The study of value is a difficult task since there is no single, generally accepted method of measuring it, although many researchers claim that some methods give correct results (Jensen, 2010). Evaluating the effectiveness of value management requires identifying the factors that influence value and creating measures to assess the strength and quality of these processes. ...
Purpose: The primary aim of this study is to examine whether the Van Horne coefficient model impacts company growth, as indicated by the EPS indicator. Design/methodology/approach: The study was conducted on non-financial companies listed on the WIG, DAX, and OMX indices. The main tool of the analysis is the Van Horn sustainable growth model and its correlation with the EPS of the companies. Findings: The study found that the VSGR coefficient has a negative impact on the 3-year growth of companies listed on stock exchanges in Germany and Sweden. Similar results were obtained in the 5-year period study. For the Polish market, the VSGR coefficient is not statistically significant (OLS model). However, the study highlighted the significant role of the ROE coefficient and the level of company assets in shaping EPS. Research limitations/implications: At this stage, the study compares the Polish market to two other selected markets, which serve more as indicators of the future for us rather than as a comparative group. This perspective on the researched issue is significant but requires further investigation, taking into account other markets, including those similar to the Polish market. It is also important to extend the research to include longer time horizons in the models. Practical implications: The conducted study aligns with the current and important trend of research on sustainable development, which is a priority element in building company strategies within the European Union. Given the lower level of development of the Polish market compared to the German or Scandinavian markets, the findings for the comparative markets provide an insight into the situation we may encounter in Poland if we choose a similar pattern of actions and development. Originality/value: The conducted analyses are the first to use the Van Horne model on such a broad sample, indicating the potential for implementing sustainable development strategies in Polish companies with the aim of achieving development according to the model observed in Western European countries. Keywords: Company growth, WACC, Cost of capital, Van Horne coefficient model. Category of the paper: Research paper.
... Compte tenu des difficultés à distinguer la part systémique, et la part spécifique de la performance, la rémunération variable est partiellement liée à la chance (Bertrand et Mullainathan, 2001). Enfin, les critères financiers ne répondent qu'aux exigences des actionnaires, considérés comme les seuls créanciers résiduels de l'entreprise (Jensen, 2002). Or, selon Charreaux et Desbrières (1998), la contribution du capital financier à la formation de la rente organisationnelle n'est que partielle et la création de valeur dépend également des autres parties prenantes (salariés, créanciers, État, etc.). ...
Cet article examine l’influence de la présence des femmes au sein du conseil d’administration (CA) sur l’intégration des critères de responsabilité sociétale de l’entreprise (RSE) dans la rémunération variable annuelle des dirigeants. Pour étudier cette relation, nous nous appuyons sur les théories des échelons supérieurs et de la masse critique. D’un point de vue méthodologique, nous recourons à la régression logistique et à la méthode des moindres carrés généralisées sur des données de panel. En nous basant sur un échantillon de 102 sociétés appartenant à l’indice boursier SBF 120 sur la période allant de 2014 à 2019, les résultats obtenus montrent que la présence des femmes au sein du CA influence positivement la décision d’intégrer des critères RSE dans le bonus annuel des dirigeants. Cette influence se manifeste principalement dans les CA qui comptent au moins 40% des femmes. Ce résultat confirme la théorie de la masse critique et s’inscrit dans la continuité de la loi Copé-Zimmerman.
... The interaction between sustainable business practices and a company's market value, and their reciprocal influences, has been a subject of scholarly inquiry, with implications extending beyond short-term considerations. Rather than viewing stakeholders versus shareholders dichotomously, recent scholarship emphasizes the importance of focusing on long-term market value [21]. The maximization of shareholder wealth can, in essence, align with the promotion of social welfare. ...
The relationship between a company’s Environment, Social and Governance (ESG) scores and market value dynamics has been the focus of extensive research. Our study aimed to provide insights into this relationship and its implications for Chinese investors. We used a general Cross-lagged panel model to analyze data from 652 Chinese-listed companies from 2013 to 2019. Our findings indicate that ESG scores have a long-term impact on market value, with a consistently positive correlation between the two. We also discovered that Chinese investors consider ESG factors when evaluating a company’s financial health. Companies that prioritize ESG factors are more likely to attract investment. Moreover, the diffusion of ESG information happens slowly, and past ESG performance influences future ESG performance. Thus, maintaining good ESG performance is crucial for long-term sustainability and success. In addition, our analysis reveals significant insights into the interplay between ESG metrics and mandatory disclosure regulations. Specifically, we find that the interaction between average ESG score and mandatory disclosure significantly impacts firm value, suggesting a nuanced relationship between ESG performance and market valuation in the context of regulatory requirements. Overall, our study highlights the importance of considering ESG factors when evaluating financial health and making investment decisions, providing valuable insights for firms and investors alike.
... Financial mismanagement, including imprudent investment decisions or budgetary misallocations, can directly affect an organization's profitability (Jensen, 2001). When financial resources are misapplied, returns on investment may diminish, leading to reduced overall profitability. ...
This study examines the moderating role of institutional enforcement on the relationship between misapplication of financial resources and organizational performance. An explanatory research design was adopted. The study used quantitative approach and relied on a single cross-sectional survey. A purposive sampling technique was employed to obtain a sample size of 240. The findings of the study indicate that misapplication of financial resources has no statistically significant influence on organizational performance. There is a strong positive and statistically significant influence of institutional enforcement on organizational performance. Institutional enforcement has a significant moderating effect on the relationship between the misapplication of financial resources and organizational performance. Understanding the moderating role of institutional enforcement is essential for organizations seeking to enhance financial accountability and mitigate the risks associated with financial mismanagement.
... In such a world, the attempts by managers to maximize shareholder value would not prompt the market process that coordinates supply and demand and allocates resources in society according to consumer demand. Contrary to Jensen's (2001) claims (see section 3.3), the invisible hand has no place in this story. ...
According to the widespread, neoclassical market ideology, market prices are not simply helpful, yet imperfect, reference points for consumers and profit-seeking enterprises. Rather, they are interpreted as reflecting the true value of goods. The hypothetical end result of the market process - the market equilibrium - is thereby assumed to be an ever-satisfied condition of the market economy. Based on this unrealistic presupposition, this market ideology maintains that the performance of managers can be evaluated from the prices of the (net) assets they control and, in the case of publicly traded companies, share prices. The share prices supposedly reflect the value that managers create for shareholders and, thus, the economy as a whole. If this were actually the case, the maximization of so-called shareholder value would be a socially beneficial goal for managers. The present paper demonstrates, however, that the ongoing reorientation of corporate governance toward the maximization of values (as revealed by share prices) instead of profits (as determined by the accounting system) destroys the very market processes that coordinate business activity and allocate resources in the market economy.
... Mitchell, Agle & Wood, (1997) indicate that the stakeholder theory is focused on the various sets of people who can affect or are affected by the activities of an organization. Jensen, (2001) observed that stakeholder theory proposes that firms should be operated for the advantage of all those who have a stake in the enterprise, including employees, customers, suppliers, and the community. For Evan & Freeman, (1993), stakeholder theory suggests that the interests of all stakeholders are of fundamental value, and managers must offer identical consideration to the genuine interests of all stakeholders. ...
The oil and gas industry in Rivers State, Nigeria, faces significant challenges in maintaining sustainable supply chains. With increasing global attention on environmental responsibility, financial efficiency, and social equity, the sustainability of supply chains has become a critical concern. The purpose of the study was to investigate the relationship between e-procurement and supply chain sustainability of the oil and gas industry in Rivers State. Anchored on the Stakeholder theory, it adopted a quantitative and explanatory research design with a positivism research paradigm and conducted a correlational investigation without any form of manipulation in a non-contrived setting to ascertain the degree of relationship between e-procurement and supply chain sustainability of the oil and gas industry in Rivers State. The target population of this study was twenty-five (25) oil and gas firms in Rivers State according to the Nigeria Directory & Search Engine Finelib.com (2023). Due to the small size of the population, the census method was adopted. To guarantee comprehensive representation of the companies, five (5) respondents were drawn from each of them for the survey, as representatives of the firms based on their managerial roles, they include; supply chain managers, procurement managers, product managers, operations managers and brand managers. Hence, the respondents constituted one hundred and twenty-five (125) employees of the firms. However, only one hundred and three (103) copies of the questionnaire were found useful for the study. A well-structured, self-administered survey questionnaire was adopted, validated and a reliability test conducted before it was used for primary data collection. The data were analyzed using both descriptive and inferential statistics; Pearson Product Moment Correlation and Partial Correlation were employed to establish the degree of relationship between the variables with the aid of Statistical Package of Social Sciences Software (SPSS) version 22. The research results revealed that E-procurement has a significant, strong, positive relationship with environmental responsibility, financial responsibility and social responsibility in the oil and gas industry in Rivers State. The study concluded that e-procurement relates positively and significantly with supply chain sustainability in the oil and gas industry in Rivers State. And competitive pressure has a positive and significant impact on the relationship between both variables. The study therefore, recommends that the oil and gas industry in Rivers State should continuously improve on their e-procurement strategies to facilitate the achievement of supply chain sustainability objectives. As well as to combat competitive pressure through strategic e-supplier collaboration and circular strategy of waste reduction in the oil and gas industry in Rivers State.
... For instance, Kiondo (2004) highlights the prevalence of accrual basis accounting among government entities, which records revenues when earned and expenses when incurred, irrespective of cash transactions, providing a clearer financial perspective. Additionally, Jensen (2001) notes the common use of fund accounting in the public sector to track resources designated for specific purposes or programs, ensuring proper allocation and expenditure. Moreover, public sector accounting encompasses robust budgeting processes (Barton, 2006), aligning financial plans with organizational goals and objectives to ensure resources are utilized efficiently and effectively, thereby promoting fiscal responsibility. ...
This study explores the pivotal role of accountability and transparency in fostering trust between government and the public. Effective understanding of decision-making processes and public fund management enhances governmental legitimacy. Various methods, particularly accounting practices, are employed to uphold accountability and transparency in the public sector. However, not all accounting practices achieve these goals. Therefore, stakeholders' perspectives on the efficacy of accounting practices in promoting accountability and transparency are crucial. Employing a phenomenological design and purposive sampling, the study engaged 24 participants through interviews and focus groups. Analysis revealed divergent stakeholder opinions: some viewed accounting practices positively in enhancing accountability in Tanzania's public sectors, while others expressed skepticism. Overall, the findings underscore the foundational role of accountability and transparency in ensuring good governance, bolstering public trust, combating corruption, and optimizing public service delivery. The study concludes with recommendations aimed at fortifying accounting practices to better promote accountability and transparency in the public sector.
... Chain shareholders, motivated by the desire to maximize their interests, may impede efforts to digitally convert businesses to reduce the amount of competition within the same industry. Although chain shareholders hold shares in numerous listed businesses, their primary purpose is to maximize their gains, which may be in direct opposition to the objectives of each listed firm (Jensen, 2010). Because of this, if a publicly traded firm in which chain shareholders own shares undergoes a digital transformation, it may acquire a competitive edge in the sector, which may drive other publicly traded companies affiliated with the chain to follow suit. ...
This study delves into the pivotal role of chain shareholders in fostering digital transformation within Chinese-listed companies from 2014 to 2022. By employing a robust empirical analysis, we uncover a significant positive relationship between the presence of chain shareholders and the likelihood and extent of digital transformation initiatives. Our findings highlight the crucial influence of chain shareholders in supplying necessary financial resources, facilitating the exchange of vital information, and leveraging their extensive networks to spur innovation and technological adoption. Interestingly, the impact is more pronounced in non-state-owned businesses, companies outside high-tech sectors, enterprises in “Broadband China” demonstration cities, and those in growth stages, underscoring the multifaceted nature of digital transformation drivers. Furthermore, through robustness checks and endogenous tests, we validate the significance of chain shareholders in mitigating financial constraints and providing a competitive edge in the rapidly evolving digital economy. This research contributes to the understanding of corporate governance’s impact on technological innovation, offering valuable insights for policymakers, business leaders, and academics striving to harness digital technologies for sustainable development in the knowledge economy. Our findings advocate for strategic stakeholder engagement and governance reforms to facilitate a conducive environment for digital transformation, thereby enhancing corporate competitiveness and economic resilience in the digital era.
... Oleh sebab itu, bantuan dari pihak lain sangatlah penting dalam mempengaruhi keberadaan suatu perusahaan. Jensen (2001) berpendapat bahwa manajemen dalam membuat suatu keputusan juga harus dapat memperhatikan stakeholder nya untuk dapat memberikan kontribusi dalam penambahan nilai perusahaan. Stakeholder disini juga mempunyai hak menentukan terhadap tindakan-tindakan manajemen dalam melakukan atau mengambil suatu keputusan yang mempunyai efek bagi perusahaan, seperti halnya para pemegang saham (Waryanti, 2009). ...
The purpose of this study is to determine whether the quality of audit affects earnings response coefficient by using earnings management and debt policy as intervening variables. This research is done by using purposive sampling method. The results of this study can be seen that, KAP size variables do not have a significant influence on debt policy mean a while the variable earnings management (Manlab) has a significant influence on earnings (ERC) in manufacturing companies in Indonesia Stock Exchange. In addition, Debt Policy variables have a significant influence on earnings (ERC), and KAP Size variables with variable debt policy intermediaries have a significant effect on earnings (ERC) on manufacturing companies in Indonesia Stock Exchange. It is expected for the users of information and further researchers, this research can be used as a source of new analysis for variable earning response coefficient.Keywords: Earning Response Coefficient, Audit Quality, Profit Management, Debt Policy
... However, the classical economic approach describes competition as a mechanism that ensures efficient management of resources, encourages innovation and therefore produces a positive result for the community. This dogma is used as an argument by authors of the Chicago school such as Friedman (1971) who assert that the sole responsibility of the MFI is to be profitable for its shareholders, since a competitive market ensures the convergence between the maximization of the MFI's long-term value and the maximization of social welfare (Jensen, 2001). Indeed, when there are many MFIs in the market, customers are willing to borrow from multiple lenders and, therefore, incentives do not work well (Fatururimi, 2010). ...
The objective of this article is to analyze the effect of competition on the social performance of microfinance institutions in Cameroon. In order to do so, we employ the Structure-Conduct-Performance paradigm. For the empirical analysis we use panel data for 19 microfinance institutions extracted from MIX MARKET database for the period 2002 to 2012. We used the institution-centered approach for social performance. The method of generalized estimating equations allowed us to test the robustness of our results. Our results show that the Lerner index is positively and significantly related to the degree of social significance at the 5% threshold. Thus, increasing competition reduces the degree of outreach. In view of these results, it is important to regularly audit the social performance of MFIs in a competitive context such as that of Cameroon. Furthermore, it appears that for the improvement of the social framework, special monitoring is needed for large MFIs.
... He said that the purpose of every organisation is to maximise the profit of its owners. Scholars, on the other hand, noted that an optimal level of using or acting in social activities in the market is necessary to avoid any conflict among stakeholders (who are affected by the organization's activities; customers, suppliers, governmental agencies, financial institutions, and local organisations, etc) (Freeman et al., 2004;Jensen, 2001;McWilliams & Siegel, 2001). This ideal, according to Waldman et al. (2006), might be elucidated by strategic cost and benefit analyses. ...
This study aimed to examine the impact of leadership styles on the social responsibility of industrial companies in Romani. To achieve this objectives the study used descriptive analytical approach through develop questionnaire to collect data from the sample which consists (357) managers who work in industrial companies in Romani. A total of (340) suitable questionnaire were retrieved for statistical analysis, the study used Statistical Package for the Social Sciences software (SPSS. 25) to analyses the collecting data and test the hypothesis. The study results showed that, there is impact of Authoritative leadership on social responsibility of industrial companies in Romania, there is impact of Democratic leadership on social responsibility of industrial companies in Romania, there is impact of Facilitative leadership on social responsibility of industrial companies in Romania, and there is no impact of Situational leadership on social responsibility of industrial companies in Romania. In light of these findings the study recommended the need to pay attention to the quality of leaders who are appointed in industrial companies in Romania due to the clear impact of the quality of leadership at the level of social responsibility practices of companies.
... According to Krüger (2015), managers who engage in corporate philanthropy benefit themselves at the shareholders' expense. Similarly, agency costs are incurred when managers invest in social activities to promote their personal reputation (Barnea and Rubin, 2010), which can cause them to lose their focus on core managerial responsibilities (Jensen, 2002). Overall, according to agency theory, ESG practices are not in the best interests of shareholders, whereas Lee and Isa (2023) find no evidence that ESG is associated with agency problems. ...
Purpose-This examine the impact of environmental, social and governance (ESG) performance on financial reporting quality (FRQ) before and during COVID-19 in the Egyptian market. Design/methodology/approach-This study uses quarterly data from 2017 to 2021 to draw conclusions, with a sample consisting of 486 firm-year observations for 27 Egyptian companies listed on the Standard and Poor's/Egyptian Stock Exchange ESG index. This study uses both firms' ESG scores and the Beneish Model, an earnings detection model, as proxies for FRQ. COVID-19 effects on ESG performance and FRQ were examined by using Pearson's correlation coefficient and two-stage least squares. Findings-COVID-19 has a significant impact on the link between ESG and FRQ. This implies that corporations with high ESG performance are less likely to manipulate earnings (having a low M-score) and thus provide high FRQ during the COVID-19 pandemic. Moreover, there is a significant positive relationship between firm size, leverage and M-Score, indicating that large firms typically present a high FRQ. Research limitations/implications-The sample size and data availability are the main research limitations. Additionally, this study only considers the effects of firms' ESG performance on FRQ during the COVID-19 pandemic. Thus, future research should consider other factors associated with investors' corporate social responsibility (CSR). Practical implications-This research has practical implications for market regulators seeking to establish a legislative framework and enhance guidance to mandate managers to provide ESG data and CSR reports appropriate for Egypt and other developing economies in times of crisis. Social implications-Promoting the adoption of ESG practices in business, particularly during crises, has the potential to effectively provide high-quality and reliable financial reporting required for investment. Originality/value-This study aspires to address notable deficiencies in the pertinent literature concerning the relationship between ESG performance and FRQ during COVID-19. To the best of the authors' knowledge, little is known about how ESG performance changes in response to pandemics in emerging markets. To address this gap, this study examines the effects of COVID-19 on the relationship between ESG performance and FRQ in Egyptian-listed firms from 2017 to 2021.
This study aims to provide empirical evidence on the influence of Financial Technology, interest rates, and dividend policy, all of which are significant factors in investment decision-making, with Corporate Social Responsibility (CSR) as a moderating variable. The study employs a quantitative approach and multiple linear regression analysis. The research sample consists of 47 banking companies listed on the Indonesia Stock Exchange (IDX), with 80 secondary data points collected from 16 samples over the 2019-2023 period. The novelty of this research lies in utilizing CSR as a moderating variable and employing STATA as the testing tool. The findings reveal that Financial Technology and interest rates do not have a significant impact on investment decisions, and CSR is not effective in moderating the relationships between Financial Technology, interest rates, and dividend policy. However, dividend policy has a significant influence on investment decisions. These findings provide valuable insights for company management, serving as a foundation for more informed investment decision-making processe.
This study lies in its focused exploration of Artificial Intelligence (AI) literacy adoption challenges within the unique context of Saudi Arabia's public healthcare sector. Unlike existing research that broadly examines AI integration in healthcare, this study emphasizes the specific barriers-including cultural, regulatory, and operational constraints-that hinder AI literacy adoption in a developing healthcare ecosystem. By employing the T-O-E framework for qualitative analysis and the Best-Worst Method (BWM) for evaluating challenges across operational levels, the study provides a comprehensive, multi-layered understanding of these barriers. Furthermore, the research links AI literacy to the advancement of Sustainable Development Goals (SDGs), highlighting its strategic importance for sustainable healthcare development. The study's insights and evidence-based recommendations offer practical pathways for overcoming institutional readiness issues, ensuring data privacy, and achieving r Conflict of interest statement The authors declare that the research was conducted in the absence of any commercial or financial relationships that could be construed as a potential conflict of interest Abstract Word count: 301 In recent years, Artificial Intelligence (AI) is transforming healthcare systems globally and improved the efficiency of its delivery. Countries like Saudi Arabia are facing unique adoption challenges in their public healthcare, these challenges are specific to AI literacy, understanding and effective usage of AI technologies. In addition, cultural, regulatory and operational barriers increase the complication of integrating AI literacy into public healthcare operations. In spite of its critical contribution in enabling sustainable healthcare development, limited studies have addressed these adoption challenges. Our study explores the AI literacy adoption barriers in context to Saudi Arabian public healthcare sector, focusing on its relevance for advancing healthcare operations and achieving Sustainable Development Goals (SDGs). The research aims to identifying and addressing the adoption challenges of Artificial Intelligence literacy within the public healthcare in Saudi Arabia.The research aims to enhance the understanding of AI literacy, its necessity for enhancing healthcare operations, and the specific hurdles that impede its successful AI adoption in Saudi Arabia's public healthcare ecosystem. The research employs a qualitative analysis using the TO -E framework to explore the adoption challenges of AI literacy. Additionally, the Best-Worse Method (BWM) is applied to evaluate the adoption challenges to AI literacy adoption across various operational levels within Saudi Arabia's public healthcare supply chain. The study uncovers substantial adoption challenges at operational, tactical, and strategic level, including institutional readiness, data privacy, and compliance with regulatory frameworks. These challenges complicate the adoption of AI literacy in the Saudi public healthcare supply chains. The research offers critical insights into the various issues affecting the promotion of AI literacy in Saudi Arabia's public healthcare sector. This evidencebased study provides essential commendations for healthcare professionals and policymakers to effectively address the identified challenges, nurturing an environment beneficial to the integration of AI literacy and advancing the goals of sustainable healthcare development.
Based on a condensed historical overview of management as an artifact, the article argues that management is still suffused by an implicit paradigm of value extraction that is ideologically and culturally tinted and that we need to find a new foothold in theory and practice, a more universally valid approach with an encompassing awareness of societal well-being and long-term impact. The radically new approach proposed is based on free energy minimization, a concept from computational neuroscience, as a universally valid principle derived from the biological imperative to survive that holds true for individuals and social systems alike. In order to reduce harmful free energy from entropy and stochastic adversity, an amplified way of perceiving and being aware of reality is required that needs to be cultivated. This is achieved through the guiding principle of Minding, an ongoing process of inner and outer awareness and caring consideration of oneself, others and the world around us, routed in a comprehensive consciousness including awareness of Body sensations, Emotions, Thoughts and Action impulses (BETA). This comprehensive, strategic awareness is proposed as a unifying, contextual framework for individual and collective well-being rather than a categorical imperative, and therefore may, when and where indispensable, include value extraction and value maximization if required for the overall objective of shared, long-term flourishing. The article also presents examples of implementation of the proposed approach for both individuals and organizations and briefly introduces MBSAT-Mindfulness-based Strategic Awareness Training, a training protocol designed specifically to enhance the competence of Minding, the guiding principle.
This article aimed to understand whether regulation affects the analyst's task of forecasting information on companies operating in the capital market in Brazil, listed and active with the Securities and Exchange Commission (CVM), in the period from 2010 to 2020. The Panel Analysis approach was used, which emerges as a statistical instrument in the evaluation and understanding of temporal dynamics and individual variations in financial contexts and which allows a statistical approach that examines data over time and between different observation units. Thus, it can deal with longitudinal data, allowing the identification of patterns over time. The sample obtained was related to 176 companies listed on B3, in the period from 2010 to 2020, with 4,031 initial observations. The model also has its analysis segregated by 10 sectors which inform companies that operate with the Securities and Exchange Commission, namely: (1) Industrial Goods; (2) Communication; (3) Cyclical Consumption; (4) Non-cyclical consumption; (5) Financial; (6) Basic materials; (7) Oil & Gas; (8) Health; (9) Information technology and (10) Public utility. The information was obtained from the Economática database. The results do not allow us to refute the proposed hypothesis that regulation influences analysts' forecast error with regard to absolute error and positive error. Thus, it indicates that analysts' forecasts may have a magnitude of error far from the actual one and may also present a confirmation bias, which implies overestimating the most regulated companies.
Amid the growing prominence of Environmental, Social, and Governance (ESG) factors in corporate strategy, this dissertation investigates how ESG can act as a strategic capability within organizations. By examining its influence on corporate valuation, internal stakeholder relationships, and post-acquisition performance, the research provides insights into how ESG performance can enhance value creation and create competitive advantage. The work presents an introductory theoretical framework followed by three empirical studies.
The first study examines the relationship between corporate environmental performance and acquisition premia through the lens of the Resource-Based View (RBV) of the firm, proposing an inverted U-shaped relationship resulting from the balance between value-adding and value-reducing drivers. It advances the RBV by introducing a dynamic resource valuation perspective, highlighting the critical role of the acquirer-target relationship in valuing resources and capabilities. Based on an analysis of 100 global acquisition announcements between 2010 and 2019, the study confirms that optimal environmental engagement maximizes acquisition premia, moderated by the acquirer's environmental performance.
The second study investigates the impact of ESG performance levels and changes over time on employee satisfaction within S&P 500 corporations. Based on Glassdoor.com employee reviews from 2009 to 2017 and natural language processing techniques, the findings reveal that the level of ESG performance (i.e., ESG Tilt) positively correlates with employee satisfaction, mediated by perceptions of organizational justice. Taking a dynamic perspective, changes over time (i.e., ESG Momentum) show indicators of a positive impact on employee satisfaction, mediated by employee expectancy. This study contributes to a more refined understanding of the relationship between ESG and employees by taking both a static and dynamic perspective, mediating factors and by a novel operationalization of organizational justice perceptions and employee expectancy through NLP analysis.
The third study examines how differences in ESG performance between acquirers and targets affect post-acquisition ESG progress and financial outcomes. Using dynamic capability and resource-based view (RBV) theories, it analyzes 117 global acquisitions from 2009 to 2019. The results show that acquiring a target with weaker ESG performance slows the acquirer’s ESG progress due to a reallocation of capabilities and resources, while a target with stronger ESG performance accelerates it. Stakeholder engagement by the acquirer moderates these effects. The study also finds that ESG rating differences impact buy-and-hold abnormal stock returns (BHAR), mediated by changes in the acquirer’s ESG score post-transaction. This work develops a synthesis of dynamic capabilities and resource integration, illustrating a bidirectional mechanism that influences the acquirer's ESG advancements, and underscores the importance of stakeholder engagement in moderating post-acquisition performance.
Collectively, this dissertation enhances the understanding of ESG as a strategic capability that can create competitive advantages through operational, strategic, and financial outcomes. It highlights the importance of integrating sustainability into core business functions, particularly in the context of acquisitions and internal stakeholder engagement. The findings also offer valuable insights for corporations aiming to leverage ESG initiatives to enhance value creation, stakeholder relationships, and long-term sustainability performance.
In a modern economy full of knowledge and technological developments, intellectual capital is seen as a source of value creation and sustainable competitive advantage. This research aims to analyze the influence of human capital, capital employed, structural capital and hedging on the value of banking companies in Indonesia with profitability as an intervening variable. This research uses secondary data obtained from company financial reports for 2014- 2021. The analysis technique used is multiple linear regression, path analysis and Sobel test with the help of the Eviews 12 program. The research results show that human capital, capital employed, structural capital have a positive effect on profitability but have no effect on company value. Other results show that hedging has no effect on profitability and company value. Research also shows that profitability is able to mediate the relationship between capital employed and structural capital on company value. However, profitability is not able to mediate the relationship between human capital and hedging on company value. A limitation in this research is that some companies do not include the notional value of derivatives as a hedging measurement in their financial reports.
Purpose - The goal is to investigate the relationship between financial performance and environmental, social, and governance (ESG) indicators and disclosures for a sample of Latin American firms.
Design/methodology/approach - Dynamic panel data regressions are used to analyze a sample of 114 companies listed on the Latin American Integrated Market, MILA (Chile, Colombia, Mexico, Peru), for the period 2011- 2020. Altman Z-score and Piotroski F-score are used as indicators of the probability of default and comprehensive financial strength. Models are developed in which the relationship between EVA and Jensen's alpha are evaluated against firms’ ESG practices.
Findings - A direct relationship between ESG strategies and financial performance was found. Better practices and transparency in ESG are related to lower probability of bankruptcy, greater financial strength, greater economic value added, and superior risk-adjusted returns.
Originality/value - First research to present empirical evidence on the relationship between ESG scores and disclosures for MILA countries, using a comprehensive set of financial performance indicators (Altman Z-scores, Piotroski F-scores, EVA, and Jensen’s alpha).
Research limitations/implications - ESG data was obtained from Bloomberg system, based on a methodology that may differ from other sources. Sample covers four Latin American countries and large corporations. Independent variables were selected for their perceived validity given their frequent use in previous studies.
This study aims to analyse the relationship between Corporate Social Responsibility (CSR) and Corporate Financial Performance (CFP) of Indian firms with the moderating role of CSR strategic integration on the relationship. This study examined a sample of 134 manufacturing firms listed on the National Stock Exchange of India from 2011 to 2021. The authors used a random effects panel regression model to study how CSR strategic integration affects the CSR-CFP relationship. The findings of this study show a significantly negative impact of CSR on CFP. Regarding the moderating effect, a positive interaction of CSR strategic integration is found, which means that the relationship between CSR and CFP is strengthened when CSR is undertaken by businesses that consider the goals of a firm. The study suggests that different measures of CSR strategic integration can be used in future studies, and market-based financial performance measures can be additionally used to test these relationships. The study contributes to the literature concerning CSR-CFP relationship by taking CSR strategic integration as the moderating variable, which is a novel idea. This study also provides suggestions to companies and policymakers who can incorporate strategic considerations in the business case of CSR, which will create positive outcomes for both companies and society.
This research aims to examine environmental performance disclosure, social performance disclosure, governance performance disclosure, and political linkages in increasing firm value in Singapore. The research method uses a quantitative descriptive approach using secondary data. The population is all companies listed on the Singapore Stock Exchange with a sample size of 87 companies and the research period is between 2018 and 2021. The hypothesis testing analysis technique uses panel data regression. The findings of this study indicate that disclosure of political ties, disclosure of governance performance, and disclosure of environmental performance all increase firm value. However, firm value is not influenced by social performance disclosure. This research looks at how political connections and firm value are influenced by disclosure of environmental performance, social performance, governance performance and other factors. To increase business value, it is important to disclose environmental performance, social performance, governance performance and political relationships, as this research shows. The implications of this research show that sustainability report disclosure provides a good signal that can increase firm value.
Background, the context and purpose of the study: Higher education is shifting from institutional success factors to student-centred learning, focusing on research-based methods and student involvement. This shift emphasizes the importance of holistic education based on intended learning outcomes and suitable processes. Using the pragmatic research paradigm, the study sought to identify stakeholder attitudes and feelings regarding student involvement vis-à-vis quality assurance processes and outcomes. The study targeted 15 quality assurance officers and Student Representative Council members per institution. Results, the main findings: Findings underscore that to a large extent, this is not the case among higher education institutions, buttressing the need for student-involvement in quality-assurance and promotion initiatives. Higher education institutions should balance student-involvement in quality-assurance processes without compromising the same desired quality. Faced with the paradox, higher education institutions tend to involve students only peripherally in important academic quality-assurance processes short-changing them thereby. Correspondingly, trends should move from university-centred evaluation of teaching and learning towards student-centred evaluation of teaching and learning. Conclusions, brief summary and potential implications: Consistently followed, evidence indicates universities that have reacted to student feedback through enhancing their participation have student-satisfaction, closely related to clear, tangible action taken. Students of STEM can, and should be engaged as ‘producers and products’ at all levels of quality assurance processes, from academic boards to working with staff developing innovative teaching materials.
Purpose: Examine the relationship between corporate governance (CG) and corporate sustainability (SC), measured though Environmental, Social, and Governance (ESG) variables.Methodology: The study is explanatory in scope, and we used the feasible generalized least squares (FGLS) methodology to analyze the results.Findings:The results show that some aspects of the board of directors such as size, committees and gender diversity significantly explain corporate sustainability, while CEO duality, independence, and tenure on the board do not. Practical implications: to offer a perspective for institutions to promote companies to advance in matters pertaining corporate governance and sustainability to guarantee long-term viability of organizations, society, and the environment.Value: The results contribute to academic knowledge about the relationship between CG and SC in Latin America by offering a better understanding of the topic and enabling new areas of research in the region. Most studies have focused on the relationship between ESG and performance, portfolio analysis, corporate disclosure, or asymmetric information. Unlike these studies, this work extends the field of research in CG by identifying the variables of the board of directors that are related to corporate sustainability.Limitations: One of the limitations of the study lies in possible selection, information, and reporting biases as the ESG metrics may not fully reflect corporate sustainability. It is essential to address this gap through better adaptation of the measures and deeper theoretical exploration to better understand corporate sustainability in Latin America.
As agricultural operations are increasingly industrialized, the role of stakeholders ( SH s) becomes critical to the sustainability of the farming business. Arable farms are particularly expanding their geographical scales and socioeconomic impacts on the surrounding community, which gives particular importance to stakeholder management in relation to internal and external parties. Although the majority of arable farming comprises family farms, they have been on the decline because of succession problems, while non-family farms have been increasing. Success or failure of SHM is closely related to organizational forms because the form represents primal SH s. However, little research has examined the impact of SHM on performance in arable farming. This paper empirically investigates how SHM in various organizational forms is associated with the corporate performance of Japanese paddy farms. A questionnaire survey of Japanese paddy farm corporations was conducted in 2014, and 217 questionnaires from 63 family, 64 joint-stock, and 90 community farms were used in our estimates. Our estimation examines the following hypotheses: (i) SHM is associated with the corporate performance of paddy farms, and (ii) effective SHM varies depending on the organizational forms. The results suggest that, first, effective SHM is linked to organizational forms. In other words, the choice of form can offset the impact of SH s. Second, excessive emphasis on listening to opinions from the surrounding community may harm their performance, particularly at joint-stock farms, which expand in scale. Third, at family farms, attracting younger employees is crucial for running the business. Last, harmonious relations with the community are most important at community farms compared with other types of farms.
Purpose
This paper aims to examine whether reconciling profit maximization and social welfare as two possible aspirations of company is feasible.
Design/methodology/approach
The possible corporate goals are presented by drawing an arc from purely profit-maximizing organizations via a combination of profit and social objectives to organizations clearly serving social utility. In addition to this sorting principle, the order of the different positions presented also takes into account the number of goals and goal-setters.
Findings
The primary finding of the study is that none of the business concepts discussed here met the initial expectations as for economic and social objectives. The study points to the need to redefine the purpose of business within a broader social science framework.
Research limitations/implications
For a critical perspective, this paper considers only those standpoints that emphasize a certain form of social utility beyond profitability resulting from business activity directly or indirectly.
Originality/value
In addition to revealing the relationship between the two aspirations, the novelty of the paper lies in the attempt to explore through normative critique and empirical evidence the validity of the expectations regarding the goals.
Keywords
Citation
Katona, K. (2024), "Is it possible to reconcile the economic and social objectives of companies? A critical perspective", Society and Business Review, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/SBR-08-2023-0251
La estructuración del portafolio de productos alimenticios a base de café a partir del entendimiento del mercado
Prácticas empresariales respecto al ingreso a mercados internacionales a través de líneas de productos de lujo en Forja.
Reseña de la empresa Belt Colombia. Caso de estudio y Preguntas de trabajo
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.
The stakeholder theory has been advanced and justified in the man- agement literature on the basis of its descriptive accuracy, instrumen- tal power, and normative validity. These three aspects of the theory, although interrelated, are quite distinct; they involve different types of evidence and argument and have different implications. In this article, we examine these three aspects of the theory and critique and integrate important contributions to the literature related to each. We conclude that the three aspects of stakeholder theory are mutually supportive and that the normative base of the theory-which includes the modern theory of property rights-is fundamental. If the unity of the corporate body is real, then there is reality and not simply legal fiction in the proposition that the man- agers of the unit are fiduciaries for it and not merely for its individual members, that they are . . . trustees for an institu- tion (with multiple constituents) rather than attorneys for the stockholders.
The theory of the optimal allocation of resources under conditions of certainty is well-known. In the present note, an extension of the theory to conditions of subjective uncertainty is considered.
This paper analyzes the counterproductive effects associated with using budgets or targets in an organisation's performance measurement and compensation systems. Paying people on the basis of how their performance relates to a budget or target causes people to game the system and in doing so to destroy value in two main ways: (a) both superiors and subordinates lie in the formulation of budgets and, therefore, gut the budgeting process of the critical unbiased information that is required to coordinate the activities of disparate parts of an organisation, and (b) they game the realisation of the budgets or targets and in doing so destroy value for their organisations. Although most managers and analysts understand that budget gaming is widespread, few understand the huge costs it imposes on organisations and how to lower them.
My purpose in this paper is to explain exactly how this happens and how managers and firms can stop this counter‐productive cycle. The key lies not in destroying the budgeting systems, but in changing the way organisations pay people. In particular to stop this highly counter‐productive behaviour we must stop using budgets or targets in the compensation formulas and promotion systems for employees and managers. This means taking all kinks, discontinuities and non‐linearities out of the pay‐for‐performance profile of each employee and manager. Such purely linear compensation formulas provide no incentives to lie, or to withhold and distort information, or to game the system.
While the evidence on the costs of these systems is not extensive, I believe that solving the problems could easily result in large productivity and value increases – sometimes as much as 50–100% improvements in productivity. I believe the less intensive reliance on such budget/target systems is an important cause of the increased productivity of entrepreneurial and LBO firms. Moreover, eliminating budget/target‐induced gaming from the management system will eliminate one of the major forces leading to the general loss of integrity in organisations. People are taught to lie in these pervasive budgeting systems because if they tell the truth they often get punished and if they lie they get rewarded. Once taught to lie in this system people generally cannot help but extend that behaviour to all sorts of other relationships in the organisation.
A vast and often confusing economics literature relates competition to investment in innovation. Following Joseph Schumpeter, one view is that monopoly and large scale promote investment in research and development by allowing a firm to capture a larger fraction of its benefits and by providing a more stable platform for a firm to invest in R&D. Others argue that competition promotes innovation by increasing the cost to a firm that fails to innovate. This lecture surveys the literature at a level that is appropriate for an advanced undergraduate or graduate class and attempts to identify primary determinants of investment in R&D. Key issues are the extent of competition in product markets and in R&D, the degree of protection from imitators, and the dynamics of R&D competition. Competition in the product market using existing technologies increases the incentive to invest in R&D for inventions that are protected from imitators (e.g., by strong patent rights). Competition in R&D can speed the arrival of innovations. Without exclusive rights to an innovation, competition in the product market can reduce incentives to invest in R&D by reducing each innovator's payoff. There are many complications. Under some circumstances, a firm with market power has an incentive and ability to preempt rivals, and the dynamics of innovation competition can make it unprofitable for others to catch up to a firm that is ahead in an innovation race.
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Inside 'the balanced scorecard
- Towers Perrin
Towers Perrin, " Inside 'the balanced scorecard', " Compuscan Report, January 1996: pp.
1-5.
Email: cs-journals@wiley.com; Tel
- Asia Pacific
Asia Pacific: Email: cs-journals@wiley.com; Tel: +65 6511 8000.
Performance, Compensation, and the Balanced Scorecard
- Cristopher Ittner
- David F Larcker
- Marshal W Meyer
Ittner, Cristopher, David F. Larcker, and Marshal W. Meyer, " Performance, Compensation,
and the Balanced Scorecard, " Unpublished, Wharton School, U. of Pennsylvania, November 1,
1997.