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On Stakeholder Theory and Corporate Investment under Financial Frictions

Zauner, K. ORCID: 0000-0002-8605-5349 & Mykhayliv, D. (2024). On Stakeholder Theory and Corporate Investment under Financial Frictions. International Journal of Finance and Economics, doi: 10.1002/ijfe.2942


The view that corporations have a wider focus than just maximizing shareholder value has received considerable attention from practitioners, managers, and academics alike. We investigate the Q theory of corporate investment with financial frictions when management maximizes stakeholder value instead of shareholder value. Different objective functions are investigated. We characterize the optimal investment and financial policy of the firm. The results show that stakeholder firms invest more than shareholder firms, i.e., over invest, and an increase of stakeholder shares increases investment, except when equity issuing firms face severe informational asymmetries or severe cost of external equity. We also discuss different approaches to model investment of stakeholder firms and its implications for empirical analysis.

Publication Type: Article
Additional Information: © 2024 The Authors. International Journal of Finance & Economics published by John Wiley & Sons Ltd. This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
Publisher Keywords: Stakeholder Theory, Corporate Investment, Financial Frictions, Q Theory, Corporate Governance
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
Departments: School of Policy & Global Affairs > Economics
SWORD Depositor:
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