Exploring the rationale of enlightened shareholder value in the realm of UK company law – the path dependence perspective

Despite conventional beliefs in the predominance of shareholder value, a broader agenda of stakeholder consideration has been advocated in the UK by the recently-introduced ESV principle – the overriding corporate objective in the new company law regime. In this paper, the efficiency of this principle in terms of stakeholder enhancement is challenged through an interdisciplinary analysis. Through a critical review of the ESV principle, it is discovered that stakeholder enhancement practices in the context of the 2006 company law regime are still for the fundamental goal of shareholder value maximisation, and that their enlightened impact has been fairly limited in practice. Furthermore, by revisiting the interrelationships between UK economic, political and cultural factors with the predominance objective of shareholder value maximisation in the Companies Act 2006, it is discovered that the enlightened effect of this new approach in the company law regime is in fact impeded by strong, persistent forces deriving from shareholder-oriented particulars. Providing insight into the future direction of corporate governance practice, the paper concludes the rationale behind the shareholder-oriented ESV principle, and further suggests the continuing predominance of shareholder value in UK corporate governance

How do Croatian Companies make Corporate Risk Management Decisions: Evidence from the Field

According to the Capital Asset Pricing Model and the Modigliani-Miller theorem, corporate risk management is irrelevant to the value of the firm. However, it is apparent that managers are constantly engaged in hedging activities that are directed at the reduction of corporate risks. As an explanation for this clash between theory and practice, imperfections in the capital market are used to argue for the relevance of corporate risk management function. This paper analyses corporate risk management practices and decision to hedge in large Croatian non-financial companies. It explores if decision to hedge corporate risks in the analysed companies is a function of several firm’s characteristics that have been proven as relevant in making risk management decisions.corporate risk management decision, hedging rationales, shareholder value maximisation, managers’ private utility maximisation, large Croatian non-financial companies

Composable entropy and deviation from macroscopic equilibrium

We formulate, under general conditions, the problem of maximisation of the total entropy of the system, assumed to be in a composable form, for fixed total value of the constrained quantity. We derive the general form of the composability function and also point out the criterion which leads to a violation of the zeroth law of thermodynamics.Comment: 10 pages, Latex, no figure

Measuring the societal value of lifetime health

This paper considers two societal concerns in addition to health maximisation: first, concerns for the societal value of lifetime health for an individual; and second, concerns for the value of lifetime health across individuals. Health-related social welfare functions (HRSWFs) have addressed only the second concern. We propose a model that expresses the former in a metric – the adult healthy-year equivalent (AHYE) – that can be incorporated into standard HRSWFs. An empirical study based on this formulation shows that both factors matter: health losses in childhood are weighted more heavily than losses in adulthood and respondents wish to reduce inequalities in AHYEs

Measuring the societal value of lifetime health

This paper considers two societal concerns in addition to health maximisation: first, concerns for the societal value of lifetime health for an individual; and second, concerns for the value of lifetime health across individuals. Health-related social welfare functions (HRSWFs) have addressed only the second concern. We propose a model that expresses the former in a metric – the adult healthy-year equivalent (AHYE) – that can be incorporated into standard HRSWFs. An empirical study based on this formulation shows that both factors matter: health losses in childhood are weighted more heavily than losses in adulthood and respondents wish to reduce inequalities in AHYEs

Risk-sensitive investment in a finite-factor model

A new jump diffusion regime-switching model is introduced, which allows for linking jumps in asset prices with regime changes. We prove the existence and uniqueness of the solution to the risk-sensitive asset management criterion maximisation problem in this setting. We provide an ODE for the optimal value function, which may be efficiently solved numerically. Relevant probability measure changes are discussed in the appendix. The approach of Klebaner and Lipster (2014) is used to prove the martingale property of the relevant density processes.Comment: 23 pages, 1 figur

A Review of the Rationales for Corporate Risk Management: Fashion or the Need?

This paper presents the extensive literature survey based both on theoretical rationales for hedging as well as the empirical evidence that support the implications of the theory regarding the arguments for the corporate risk management relevance and its influence on the company’s value. The survey of literature presented in this paper has revealed that there are two chief classes of rationales for corporate decision to hedge - maximisation of shareholder value or maximisation of managers’ private utility. The paper concludes that, the total benefit of hedging is the combination of all these motives and, if the costs of using corporate risk management instruments are less than the benefits provided via the avenues mentioned in this paper, or any other benefit perceived by the market, then risk management is a shareholder-value enhancing activity