We analyze, from the viewpoint of value creation, the evolution of Corporate Social Responsibility (CSR) thought from Friedman critical view of CSR to Porter and Kramer “shared-value” proposition, emphasizing, at the same time, its parallelism with the evolution of asset valuation models from the viewpoint of common stocks value. On this basis, we show how CSR has adapted to value creation, the corporate goal that has substituted the old goal of profit maximization. A review of the studies about the impact of CSR on corporate financial performance complements this analysis.
This paper explores how financial markets can support the practical applicability of Sustainability Development Goals (SDGs) principles and why ethics has a central role in this process. The efficient market hypothesis holds that a financial market is efficient when prices equate value. Extending this assertion to sustainability, it can be said that prices should become equal to sustainable value. Prices can be regarded as the addition of the present value of future expectations and the impact of short-term volatility. This property parallels the existence of two different types of shareholders: long-run shareholders, who are often involved in the management of the corporation, and short-run shareholders, who usually apply speculative strategies to the choice of their investments. The SGDs' principles are logically thought for a long-run horizon. Their impact on corporate value stems mainly from the changes they introduce in environmental and social risk, apart from becoming a potential source of innovation. Nevertheless, their effects on the short-run perspective can be very small unless either market traders assume sustainability as a goal of their own or the sustainability effects are incorporated into prices. We hold that the second issue is safer and preferable. Both involve ethics: the former would require that investors perform any trade from an ethical perspective. The latter needs that the ethical emphasis is placed on the process of price determination. The achievement of this goal demands a wide display of information on sustainability, placed together with financial information, and appropriate regulation. Its analysis considers the principles of behavioral finance.
Purpose This paper aims to analyse the corporate rent-vs-buy decision on real estate through the trade-off theory and default option in the framework of a corporation that aims to optimise its capital structure. Design/methodology/approach The methodological core of this paper comprises the trade-off theory that approaches the optimal capital structure by counterbalancing debt tax savings with bankruptcy costs. Impacts on the default option and the default barrier are made explicit. The paper also explores the practical applicability of the renting scenarios in the European context by examining the regimes of real estate investment trusts in different countries from the demand-side of commercial renting. Findings Analytical relationships with tax savings, bankruptcy costs, default option and default barrier are identified for the renting-vs-buying real estate decisions. Research limitations/implications The theoretical model assumes simplifications, such as constant debt, to make it operational. The paper centres exclusively on the trade-off capital structure theory. Practical implications This paper is an analysis of corporate real estate decisions together with capital structure. Applications are not only quantitative but also conceptual and strategic. Originality/value Identifying the main variables that govern the impact of corporate real estate decisions on capital structure and interweaving different approaches generates a conceptual framework that enlightens strategic thinking in this field.
This paper focuses on the evaluation of Corporate Social Responsibility (CSR) investment projects from the perspective of the triple bottom line. One of the most relevant roles of CSR is the mitigation of the negative externalities generated by corporate investments, which often requires undertaking specific investment projects that fall in the scope of CSR. The main goal of these CSR projects is to improve corporate sustainability instead of maximising financial value creation. Thus, they must be evaluated for their impact on the natural, social, and financial capitals, answering these three questions: What is its efficacy for the mitigation of the externalities under consideration? What is its economic efficiency for stakeholders? What is its financial sustainability? The proposed evaluation method interlinks monetary with physical units by generating dimensionless indicators. The paper also presents a metric that unites in a single indicator the effects on the natural, social, and financial capitals. Reliable capital budgeting decisions must fit with corporate strategic planning. Since this principle also holds for CSR, the paper includes a section on the strategic planning of CSR. A numerical illustration and a case study, developed with the aid of text mining techniques, show the applicability of the findings of this paper.
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