Corporate Finance Coursework Essay Example | Topics and Well Written Essays - 2000 words

Corporate Finance Coursework - Essay Example It is a given business and finance objective to maximize shareholder value. It appears that there are also non-financial objectives of business hence the debate on shareholder value and stakeholder society rages on. The application of corporate finance theory will therefore will dwell in determining how real is the debate in relation to investment decisions in China under the new draft of Chinese employment contract law? Tirole, Jean (1996) dissected corporate governance on a debate between shareholder value and stakeholder society. He mentioned that corporate governance could be framed in terms of â€Å"shareholder value† using the economists assertion that â€Å"prices reflect the scarcity of resources that management should aim at maximizing shareholder wealth.† On the other hand, he narrated that stakeholder society would approximate the non-economist view of what may appear as â€Å"oblivious to redistributional issues† narrow-minded- or â€Å"out of touch with social realities† as consequences of limiting corporate governance to shareholders’ value maximization. To support the stakeholder society concept, he cited a prevalent view in politics and public opinion that â€Å"corporations should serve a larger purpose and â€Å"be responsible† that is they should reach out to other stakeholders not only to shareholders† (Tirole, 1996) (Paraphrasing made). In discussing therefore â€Å"The Corporate Social Responsibility View†, Tirole (1996) discussed ways under which an â€Å"economist would rephrase the position of the proponents of the stakeholder society† as could recommending â€Å"that management and directors internalize the externalities that their decision impose on various groups.† He thus cited examples of such externalities and concomitant duties toward stakeholders, according to the proponents of the stakeholder society. One is the duties toward employees where he argued that â€Å"firms should refrain from laying off workers when they make