What are the potential benefits and challenges of implementing a stakeholders approach in corporate finance?
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Implementing a stakeholder approach in corporate finance presents potential benefits and challenges. The benefits include the ability to adapt strategic goals to stakeholder requirements, respond swiftly to internal and external changes, minimize risks, enhance business reputation, and ensure sustainable development . Furthermore, such an approach can align management decisions with value increments for corporate stakeholders, promoting competitive positions and justifying decisions effectively . However, challenges exist, such as the limited benefits due to internalized social costs, potential conflicts, waste, and managerial self-dealing. To address these challenges, a new double bottom line reporting system is proposed to augment traditional financial reporting with social benefits, allowing deviations from shareholder value maximization under certain circumstances . Additionally, transitioning to a stakeholder approach may not effectively combat economic inequality or redistribute power and resources, potentially preserving existing power dynamics .
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| Papers (5) | Insight |
|---|---|
| Implementing a stakeholder approach in corporate finance can enhance adaptability to external/internal changes, minimize risks, boost reputation, and ensure sustainable development by meeting stakeholder requirements effectively. | |
1 Citations | Implementing a stakeholder approach in corporate finance can lead to value creation for stakeholders but may pose challenges in balancing diverse interests and ensuring profitability. |
12 Citations | Implementing a stakeholder approach in corporate finance may give executives more power to maintain the status quo, rather than effectively redistributing resources to address economic inequality. |
21 Citations | Potential benefits of stakeholder focus in corporate governance include addressing externalities, but challenges include conflicts and managerial self-interest. Traditional shareholder model with occasional stakeholder consideration is recommended. |
| Implementing a stakeholders approach in corporate finance can enhance sustainability and responsible business practices, yet challenges may arise in balancing diverse stakeholder interests effectively. |
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