Question

How corporate social performance may affect the financial decision making and valuation?

Answer 1

Corporate Social performance will mean that firm will just not be focusing upon the financial growth but it will also be having a focus upon the the society and to look for importance of working for the welfare of societies and it will be trying to take care of the families of the employees and families of the other stakeholders and these type of Corporate Social responsibility will be helpful in order to make better decisions which are sustainable in the long run because corporate social responsibility would be advocating that company should be trying to undertake all such activities which are intended at value maximization rather than profit maximization and this value maximization will be helping the company in maximizing the value in long run through sustainable growth and it would be leading to a better financial decision making because there would be a high level of code of conduct implementation in the organisation,and there would be lesser corporate frauds and more social inclination towards fulfillment of goals of the society and it will lead to a better financial decision making structure through transparency and public disclosure mechanism.

Corporate social responsibility will also affect the business valuation because the business will be highly sustainable in nature and it will be trying to to enhance the fair decision-making through adoption of transparency and proper public disclosure and it will help the business in garnering a higher valuation in the market because market would be trying to discount that this company is looking for sustainable growth in the long run and it would be awarded with a higher valuation.