| This project aims at a statistical analysis of the relation between the long-run value of the firm and indicators of social responsibility. The long-run value of the firm tries to extend the valuation focus from profit into the three-dimensional space of social, environmental and economic aspects (people, planet, and profit). Within the class of indicators of social responsibility the focus of the project will be on indicators of environmental policy. For instance, the project copes with the problem to what extent the firm is able to internalise the negative externalities of using natural resources. The long-run value of the firm is a go-in-between of the neo-classical theory of the firm and stakeholder valuation models. Neo-classical theory takes the shareholder value to be the single indicator of the value of the firm. Stakeholder models include not only the financial interests of the shareholders, but also the social interests of consumers, employees, suppliers of natural resources, etc. The problem of stakeholder models though is the multiplicity of objectives. Most economic and organisational theories show that the use of multiple objectives leads to lower value creation. The main cause of this loss of value is the opaqueness of decisions. So the main problem in valuation, managerial decision-making, and attracting external capital is to combine indicators into single composites that are helpful in assessing managerial or investment decision processes. Once we have a better insight into the long-run value of the firm we can apply our findings in managerial decision making, (financial) regulation, and financial investment. |
