Value Maximization Research Articles

CORPORATE DIVIDEND DECISION AND FIRM VALUE IN NIGERIA

Corporate dividend decisions play a significant role in managerial decisions, and is often considered as the fulcrum of financial management decisions. While making these decisions, corporate finance is single-minded about maximizing the value of the firm. But the raging issue has been the lack of consensus on the effect of dividend policy on firm. This study therefore undertakes a comprehensive review of dividend policy theories and empirical studies on dividend policy in relation to firm value, with particular focus on Nigeria. The paper adopts the exploratory research approach using secondary data sources involving extensive review of relevant articles, theoretical and empirical studies, as well as other relevant materials. The paper established that, despite the raging theoretical controversies and contradictions of past empirical findings, there is unanimity among many researchers that corporate dividend decisions exert significant influence on firm value- a position which validates the arguments in favour of the relevance of dividends policy in determining firm value. The paper therefore recommends that finance managers of firms should aim at finding an optimal dividend policy, which is the one that maximizes the company stock price that leads to the maximization of firm value.

Trade Credit and Firm Value: Evidence from Listed SMEs

There is limited past literature on the impact of trade credit on firm value. This study uses a cross-regional sample of listed small and medium-sized enterprises in China, Eurozone and US between 2011 and 2021 to investigate regional differences of trade credit policies and their influence on firm valuation. Using accounts receivables, accounts payables andthe net trade credit position, our empirical study sheds light on the different valuation environments of stock markets in Asia, Europe and North America with the particular regard of trade credit through our definition of inclusive and egoistic firms. Moreover, the internal logical link between the stakeholder value creation behind trade credit and the holistic concept of firm value enriches contemporary debates around shareholder value maximization theory.

Effects of minimum wage policies on executive compensation contracts: An empirical analysis in China

This paper investigates the impact of minimum wage policies on executive pay-for-performance sensitivity (PPS) in the compensation packages of A-share listed firms in China. Using data from 745 counties between 2007 and 2020, we find that minimum wage policies lead to a decrease in PPS. This finding remains robust through instrumental variable approaches, cross-border matching tests, alternative measurements, and other rigorous tests. Moreover, the negative impact of minimum wage on PPS is more pronounced in companies with higher labor dependency, limited ability to pass on labor costs to customers, and lower risk resilience. These results support the hypothesis that rising labor costs due to increased minimum wage, which lead to performance distortion and heightened risk, promote shareholders to reduce PPS to optimize compensation contracts for value maximization.

Value maximization, stakeholder theory, and the corporate objective function

Value maximization, stakeholder theory, and the corporate objective function

Optimizing Parcel Package Selection Using an Enhanced Multiple Knapsack Problem Approach with Greedy Dynamic Programming

This study introduces an enhanced algorithm for solving the Multiple Knapsack Problem to optimize parcel package selection, particularly focusing on balancing value maximization with price and weight constraints. Due to Dynamic Programming requires significant memory, The proposed method employs a heuristic approach such as greedy algorithm, initially sorting items by their value-to-weight ratio and iteratively filling each knapsack to maximize total value while adhering to constraints. The algorithm demonstrates high computational efficiency, solving instances within 0.07 seconds, and achieves a total value of 122.00 across multiple knapsacks. However, the analysis reveals a significant underutilization of weight capacity (44.74%) compared to price capacity (98.92%), highlighting the need for more sophisticated constraint handling. Limitations such as the simplistic heuristic approach and single-objective focus are discussed. Future work will explore the integration of advanced optimization techniques, dynamic constraints, and multi-objective frameworks to improve solution quality and applicability in real-world scenarios. This research contributes to the field by providing a foundation for further exploration of Multiple Knapsack Problem in logistics and resource allocation contexts.

Is Social Capital Valuable? Evidence from Mergers and Acquisitions

We examine the impact of social capital on mergers and acquisitions using novel county-level social capital data from the Social Capital Project. We show that acquirers located in a high social capital county experience larger announcement returns. The effect is more pronounced when the agency problem in the acquirers is more severe. We find evidence that the acquirer’s social capital is associated with higher transaction synergies, better stock and operating performance, and shorter deal duration. Overall, the results support the shareholder value maximization view that social capital mitigates opportunistic and self-serving decisions by acquirer managers, leading to acquisitions that benefit acquirer shareholders in the short and long-term.

Transplanting Absolute Priority in Indian Bankruptcy Law: Part I

In 2016, India revamped its bankruptcy legislation and introduced a new framework for resolution of financially distressed businesses. The Insolvency and Bankruptcy Code (IBC) was intended to usher in a new era of efficiency and galvanize India’s ailing bankruptcy regime. The results thus far have been mixed. One of the issues that has frequently arisen under the new regime is how to distribute the resolution proceeds amongst different classes of creditors. The doctrine evolved by courts and tribunals has been to leave any question on distribution to the discretion of the Committee of Creditors – an approach developed to insulate bankruptcy proceedings from excessive judicial interference. In this paper, which will be published across two volumes, I endeavour to show that this approach is flawed and contributes to the systemic problems afflicting the Indian bankruptcy regime. Drawing on doctrine developed in transnational bankruptcy law, I argue in favour of adopting the absolute priority rule as a fixed rule for distribution of resolution proceeds in India, which can augment value maximization and enable efficient resolution of distressed debt. Part I of this paper will trace the origins, evolution and migration of the absolute priority rule in transnational bankruptcy law. Part II, which will be published in the following volume, will make the case for transplanting absolute priority in Indian bankruptcy law.

Effect of EVA, CFROI, MVA and CVA Methods on Shareholders Value Maximization and Financial Performance Estimation: An Empirical Study

With the globalization of markets, competition and performance pressure have accelerated. Investors rightfully expect a reasonable return on the capital they make available to others. Since companies often achieve their growth through capital obtained from new shareholders, the pressure on company profitability increases significantly. The capital market rewards companies' good performance and also punishes their bad performance. At this point, Economic Value Added (EVA), Cash Flow Return on Investment (CFROI), Cash Value Added (CVA) and Market Value Added (MVA), which ensure value maximization, have become increasingly important problems. For this reason, company profitability and growth potential are important. Within the scope of this study, the importance of EVA, CFROI, CVA and MVA indicators and their comparison with traditional methods are discussed in the introduction part. Studies on these indicators that embody value maximization are examined through a literature review. In the methodology section, the data of 11 companies active in the healthcare sector listed on Borsa Istanbul are analyzed through regression and correlation analyzes on the basis of the 2015-2021 period, and the effects of these indicators on stock returns. As a result, when MVA, CVA, CFROI and EVA are positive, economic profit is achieved and shareholder value is expected to increase.

How the Neoclassical Market Ideology Destroys the Market: Shareholder Value Maximization as a Self-Defeating Prophecy

Abstract According to the widespread, neoclassical market ideology, market prices are not simply helpful, yet imperfect, reference points for consumers and profit-seeking enterprises. Rather, they are interpreted as reflecting the true value of goods. The hypothetical end result of the market process – the market equilibrium – is thereby assumed to be an ever-satisfied condition of the market economy. Based on this unrealistic presupposition, this market ideology maintains that the performance of managers can be evaluated from the prices of the (net) assets they control and, in the case of publicly traded companies, share prices. The share prices supposedly reflect the value that managers create for shareholders and, thus, the economy as a whole. If this were actually the case, the maximization of so-called shareholder value would be a socially beneficial goal for managers. The present paper demonstrates, however, that the ongoing re-orientation of corporate governance towards the maximization of values (as revealed by share prices) instead of profits (as determined by the accounting system) destroys the very market processes that coordinate business activity and allocate resources in the market economy.

Pre-IPO dividend puzzle: Reaction to IPO underpricing or post-IPO lockup? Evidence from China

It remains a puzzle as to why firms pay cash dividends to initial investors prior to their initial public offerings (IPOs) while at the same time raising capital through the IPOs. Leveraging mandatory disclosure from three years of pre-IPO data in China, we examine two possible explanations for this puzzle: strategic reactions to IPO underpricing and post-IPO lockup. Our findings suggest that (1) when an IPO firm expects a large IPO underpricing, it pays more cash dividends pre-IPO, suggesting that initial shareholders view large IPO underpricing as undervaluing the market value of the firm's cash pre-IPO. (2) When an IPO firm pays more cash dividends pre-IPO, its initial shareholders unload fewer shares post-IPO after lockup expiration, suggesting that the initial shareholders receive “compensation” via cash dividends to ease their liquidity concern from post-IPO lockup. Both results support the proposed explanations. Additional analyses show that high cash dividend payouts pre-IPO are associated with fewer fixed assets, less investment in research and development, and poor performance post-IPO. These results indicate that cash dividends pre-IPO are not consistent with shareholder value maximization. Overall, pre-IPO cash dividends reflect a type II agency conflict in which initial shareholders seek private benefits at the expense of future shareholders.

The importance of green patents for CDS pricing: The role of environmental disclosures

Corporate green innovation to address global climate change has potential spillover effects through positive financial outcomes. This study examines how the credit market takes green innovation, measured by the approval of green patents, into account to determine the credit default swap (CDS) premia. Using a sample of United States (US) firms from 2002 to 2020, this research finds that the CDS market favourably prices green innovation: firms with more green patents have lower CDS spread, suggesting that the CDS market considers firms' green innovation in their investment decision. While greater firm-provided environmental disclosures boost the effect of green innovation, involuntary environmental exposures by external channels such as print and online media offset the favourable effect of green innovation on CDS spread. The green technology pilot program by the US Patent and Trademark Office in 2009 is exploited as a quasi-natural experimental setting to apply a difference-in-differences analysis, confirming the favourable effect of green innovation on CDS spread. The results remain robust to various sensitivity and other endogeneity tests. Managers intending to reconcile green innovation with their stakeholder value maximisation objective may find the findings interesting.

Dutch auction dynamics in non-fungible token (NFT) markets

Non-fungible tokens (NFTs) rose to prominence as a wide-scale implementation of blockchain technology to support the emergence of crypto-asset markets. These nascent digital markets raise questions about the behaviours of investors in the digital economy and their appetite for risk. Using 28,919 auction listings, 4937 sales, and 30,197 Telegram messages, we conduct a field study on the bidding and selling behaviours of NFT investors in a Dutch auction system. We reveal risk-seeking behaviours in our sample of Dutch auction sales. We document that time pressures and value propositions significantly influence NFT investors: fast clock speeds and greater price separations induce underbidding behaviours and are associated with low value retention for sellers. These results are confirmed using a matched-pairs analysis. Our study raises further questions on the risk preferences of investors in emergent digital marketplaces. We propose value maximisation strategies for marketplace developers and participants, while drawing attention to the presence of potentially exploitable biases and heuristics amongst participants, courtesy of bidding incentivisation schemes significantly altering how investors value NFTs.

Integration between experimental investigation and numerical simulation of alkaline surfactant foam flooding in carbonate reservoirs

In Brazil, pre-salt carbonate reservoirs are largely responsible for the current increase in oil production. However, due to its peculiar characteristics, increasing oil recovery by water injection is not enough. Therefore, we seek to evaluate the recovery potential using chemical methods (cEOR). Among these, the Alkali Surfactant Foam (ASF) method appears with high potential, a variant of Alkali Surfactant Polymers (ASP) without the problems presented by it. Therefore, this work presents an innovative methodology, which seeks to evaluate the potential for recovery with ASF in carbonate reservoirs by integrating experimental characterization and recovery prediction using reservoir simulation. For this, phase behavior and adsorption analyses were carried out. The experimental results provided key parameters for the simulation, such as optimal salinity, surfactant adsorption, foam mobility reduction factors. The results are from two case studies of AS and ASF flooding, using a section of UNISIM-II benchmark, using a one-quarter of five-spot model. Having the modelling for these cEOR methods defined, an optimization process for each method was applied, allowing a reliable comparison among the methods and over a base case of water injection, seeking the maximization of the net present value (NPV). As a result, in the experimental part, a low interfacial tension (IFT) value of 0.003 mN/m was achieved with a surfactant adsorption reduction of 17.9% for an optimal setting among brine (NaCl), alkali (NaBO2.4H2O), and surfactant (BIO-TERGE AS 40). In the reservoir simulation part, using a fast genetic algorithm in the optimization process, a NPV of US$ 14.43 million higher than the base case (water injection) and a 4.5% increase in cumulative oil production for the ASF injection case were obtained. Considering the analyses of production curves (cumulative oil production and oil rate) and oil saturation maps, a considerable oil production anticipation was observed, which was the main reason for NPV improvement, proving the high potential for application of the ASF method in carbonate reservoirs.

Selecting Resilient Strategies for Cost Optimization in Prefabricated Building Supply Chains Based on the Non-Dominated Sorting Genetic Algorithm-Ⅱ: Facing Diverse Disruption Scenarios

As a new sustainable building production mode, prefabricated building supply chains can realize energy saving, environmental protection and full cycle value maximization of building products. Prefabricated building supply chains often experience disruptions due to supply instability, transportation delay and force majeure, resulting in project delays and cost escalations and posing challenges to the sustainable development objectives of enterprises. Therefore, it is important and essential to study the strategy of enhancing the resiliency of prefabricated building supply chains, which has not been comprehensively explored in previous papers. This paper constructs decision-making models for supply chain cost resilience strategies under varying scenarios of supply disruptions, incorporating both redundant inventory and back-up supplier strategy. It considers the total cost and resilience of the supply chain as dual objective functions. Parameter-tuned non-dominated sorting genetic algorithm-П (NSGA-П) algorithms were used innovatively to solve the project case, and the impacts of the redundant inventory coefficient and back-up supplier supply price coefficient on the model result were analyzed. The results indicate that the supply chain with resilience construction has a superior capability to cope with disruption. The results show that when there is a mild supply disruption, the general contractor uses the capacity within the supply chain and chooses a redundant inventory strategy to restore resilience. In the event of moderate disruption, both the easy inventory strategy and back-up supplier strategy are selected to maintain supply chain stability. In the event of a severe disruption, only the back-up supplier strategy is selected to cover the losses and maintain the project schedule. In addition, the choice of resilience strategy is impacted by the inventory levels and component prices of back-up suppliers. It further verifies the effectiveness of the model and the impacts of uncertain parameters in the model on the results. This study contributes to enhancing the resilience management of the prefabricated building supply chain by the general contractor, thereby elevating the overall efficiency and competitiveness of the supply chain and furthering the sustainable development of prefabricated buildings.

Lean Supply Chain Management

In current competitive market, efficient supply chain management is essential to achieving sustainable business success. This paper explores the integration of lean principles into supply chain operations and its impact on enhancing the value creation stream. Lean principles, originally developed in the manufacturing sector, focus on waste reduction, continuous improvement, and value maximization from the customer perspective. By applying these principles to supply chain management, organizations can streamline processes, reduce costs, and improve overall efficiency. The study investigates key lean methodologies, such as Just-In-Time inventory, Total Quality Management and the 5S system, and examines their application in various stages of the supply chain, including procurement, production, and distribution. Through a combination of case studies and empirical data, the research highlights how lean initiatives lead to significant improvements in supply chain performance metrics, such as lead time, inventory levels, and defect rates. Findings demonstrate that lean supply chain practices foster a culture of continuous improvement and collaboration among supply chain partners, ultimately enhancing the responsiveness and agility of the supply chain. Furthermore, the paper discusses the challenges and best practices for implementing lean principles in supply chain management, providing a roadmap for organizations seeking to optimize their supply chain value creation. The application of lean principles in supply chain management not only drives operational excellence but also contributes to greater customer satisfaction and competitive advantage. This paper underscores the strategic importance of lean thinking in creating a robust and value-driven supply chain.

Planning cost-effective operational forest inventories.

We address a Bayesian two-stage decision problem in operational forestry where the inner stage considers scheduling the harvesting to fulfill demand targets and the outer stage considers selecting the accuracy of pre-harvest inventories that are used to estimate the timber volumes of the forest tracts. The higher accuracy of the inventory enables better scheduling decisions but also implies higher costs. We focus on the outer stage, which we formulate as a maximization of the posterior value of the inventory decision under a budget constraint. The posterior value depends on the solution to the inner stage problem and its computation is analytically intractable, featuring an NP-hard binary optimization problem within a high-dimensional integral. In particular, the binary optimization problem is a special case of a generalized quadratic assignment problem. We present a practical method that solves the outer stage problem with an approximation which combines Monte Carlo sampling with a greedy, randomized method for the binary optimization problem. We derive inventory decisions for a dataset of 100 Swedish forest tracts across a range of inventory budgets and estimate the value of the information to be obtained.

Challenging the Goal of Shareholder Value Maximization in Sustainable Business Education

Challenging the Goal of Shareholder Value Maximization in Sustainable Business Education

ANN model of a triple-junction cell in concentrating photovoltaic system

Significant advancements in concentrating photovoltaic (CPV) systems have been achieved in recent years, also thanks to the definition of calculation methods of their energy performances in several operation conditions. Typically, the CPV systems electrical power is separately calculated or in terms of its temperature or concentration factor (C), but not simultaneously in terms of both variables. In this paper, an Artificial Neural Network model based on experimental data, linking electric power of CPV system with Direct Normal Irradiance and Triple-Junction cell temperature for different C values, is developed. Moreover, the model is also adopted to realize a feasibility analysis of point-focus CPV system used for different users: residential building and agricultural livestock farm. The optimal number of modules is determined to maximize the Net Present Value (NPV) of the investment. For the residential user, an optimal configuration of CPV system includes 16 modules, providing a peak power of 3.1 kW and covering an area of 130 m2. This configuration allows the maximization of NPV value, reaching 15.9 k€, with DPB of 9.8 years. As for the agricultural livestock, 36 modules, with peak power of 7.0 kW and covering an area of 292 m2, allow the maximization of NPV value equal to 16.3 k€, with DPB of 10.2 years.

Analysis of the Impact of Enterprise Environmental, Social and Governance Performance on High-quality Development: Taking Industrial and Commercial Bank of China as an Example

ESG (Environmental, Social and Governance) advocates the transformation of enterprises from the pursuit of their own interests to the pursuit of social value maximization, which is highly consistent with the high-quality development goals, and is an effective starting point for enterprises to practice the new development concept and promote high-quality development. Under the “Dual Carbon” target, China has successively issued a series of measures to support the development of ESG. However, due to the short development time, the current domestic ESG standards are not unified, and the degree of improvement also needs to be improved. The mechanism of how to use ESG performance to promote high-quality development is not clear. This paper discusses the mechanism of the ESG performance on high-quality development in the three dimensions of environment, society and governance. Research shows that in the financial industry, for large financial institutions such as industrial and Commercial Bank of China, social responsibility has the highest weight of social responsibility, indicating that the performance of banks and financial institutions in the social level is much attention. The weight of environmental and corporate governance dimensions is relatively low, but still important. Financial institutions need to consider their environmental impact and sustainability while pursuing economic benefits. Corporate governance responsibility involves the internal governance structure, transparency, compliance, and risk management of the company, which are key factors in maintaining long-term stability and trust.

Legal Dynamics and Financial Strategy: Understanding Corporate Responses to Global Regulatory Environments

This paper examines the complex interplay between regulatory compliance, legal frameworks, and corporate finance strategies within a global context. Through a detailed exploration of the impacts of regulations on corporate financing, the role of corporate governance in shareholder value maximization, the strategic use of cross-border investment and legal arbitrage, and the intricacies of financial reporting standards and corporate accountability, this study sheds light on how legal considerations shape corporate financial decision-making. Specific attention is given to the effects of debt financing and bankruptcy laws, equity financing and securities regulations, and the classification and regulatory treatment of hybrid financing instruments on corporate capital structure and financial flexibility. By integrating academic insights and practical examples, this paper contributes to the understanding of the symbiotic relationship between legal frameworks and corporate finance, highlighting the strategic responses of corporations to legal challenges and opportunities. The findings underline the importance of a sophisticated understanding of legal and regulatory environments in crafting effective corporate finance strategies, offering valuable insights for academics, practitioners, and policymakers.