Research Handbook of Finance and Sustainability
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Research Handbook of Finance and Sustainability

Edited by Sabri Boubaker, Douglas Cumming and Duc K. Nguyen

The severe consequences of the global financial crisis 2008-2009 and numerous accounting frauds and financial scandals over the last fifteen years have let to calls for more ethical and responsible actions in all economic activities including consumption, investing, governance and regulation. Despite the fact that ethics in business and corporate social responsibility rules have been adopted in various countries, more efforts have to be devoted to motivate and empower more actors to integrate ethical behavior and rules in making business and managerial decisions. The Research Handbook of Finance and Sustainability will provide the readers but particularly investors, managers, and policymakers with comprehensive coverage of the issues at the crossroads of finance, ethics and sustainable development as well as proposed solutions, while focusing on three different levels: corporations, investment funds, and financial markets.
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Chapter 10: Sustainability and the evolution of the shareholder wealth maximization paradigm

Frank M. Werner and James A.F. Stoner

Abstract

Over the past 50 years, the shareholder wealth maximization (SWM) paradigm has become the foundation of most finance theory and practice and is often cited as the basis of the success of the global economy. However, the contributions of SWM to global economic success have been questioned, and its pursuit has led to significant damage to the planet and its inhabitants. Recent research and experience suggest that a primary reason for the failures of SWM is that the assumptions upon which it is based are over-simplifications of reality or assume a world that no longer exists. As these assumptions are rethought and brought into alignment with today’s environmental and social needs, the SWM paradigm will likely evolve to explicitly incorporate sustainability.

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