Abstract
Traditional corporate finance endorses the principle of stockholder wealth maximization as the purpose of business. In light of recent scandals and legislation, businesses are increasingly expected to use financial resources in a manner which benefits society and not just the owners of the firm. This imputation of a corporate soul will necessarily reduce investor returns, which has at least two major financial implications for the firm and the economy. The first is that it may cause investors to change their required rates of return and thereby change the amount of capital available to firms (in␣particular), and the economy (in general). The second is that it may implicitly replace equity with debt in the capital structure of firms, with all that implies for financing and corporate governance. The purpose of this article is to examine these implications and evaluate their sometimes counterintuitive consequences.
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The authors wish to express their appreciation to an anonymous reviewer who made several helpful comments on the paper.
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Kierulff, H., Learned, G. Limiting Laissez Faire Profits: The Financial Implications. J Bus Ethics 90, 425–436 (2009). https://doi.org/10.1007/s10551-009-0053-9
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DOI: https://doi.org/10.1007/s10551-009-0053-9