5.

0 Predicting the Future Approach of Corporate Finance: the New Financial Paradigm

The investigation did by Santos et al. (2007) is vital in this sense since it is distinguished the aspect
connected to theories that are blasting in this discipline (agency theory, corporate governance, business
ethics and stakeholder theory) by investigating the financial reading material. The point is to extract in an
explorative way what the current financial paradigm is featured in the basis of the financial literature.

Moreover, according to Santos et al. (2007) likewise investigated the business approach, objective,
in which the books have been encircled, to recognize on the off chance that they comply with the
development of finance. Generally speaking, most course books define the objective of the organization is
not limited to the maximization of shareholder wealth, while one of the main objectives. Their findings
express that the agency theory is an imperative part in the investigation of back, consequently, in the
majority of the books' glossary is incorporated and it comes in the index. Corporate governance is not a
topic about in finance course books, potentially by numerous definitions that this word could had. The
absence of fuse of morals in finance and stakeholder theory means the need to advance regarding the main
financial area concepts are incorporated into textbooks. In this improvement appears to be imperative
discourse on business ethics and value creation for all stakeholder in the financial books that address the
basics of this discipline. Following the analysis and personal interviews with financial experts it is
determined that the following aspects are important and relevant in finance:

5.1 Ethics in Finance

While according to the findings of this article, the previous valid judgments of corporate finance
experts may affect the results, thus business ethics should be integrated into the discipline of financial
economics analysis. However, while according to (Anbalagan, 2011: 60) finances are often considered free
of "ethics charges", one reason could be the thin line that is given to the relationship between finance and
law.

According to Dobson, 1997, inside the financial paradigm have a tendency to characterize that this
balanced agent is individualistic, materialistic and competitive. In this specific circumstance, finance has
been lessened to the mathematical function of maximizing shareholder wealth; suspicions that are required
for strong mathematical models. Theories that has been exposed, for example, Signal or Agency theories
uncover into the organization's financial related economy the bother for rules in light of the maximization
of shareholder wealth. Morals from the point of view of the stakeholders comprise on the balance the
insiders' benefits with the commitments of the organization with them. These and different parts of
stakeholder theory are talked about in more noteworthy sense following.
 This paper contributes that the moral implications of financial theories are considered morally
nonpartisan or regulating in any case. However, the primary assumptions of financial theory, including
market proficiency hypothesis (EMH) model or CAPM asset pricing, relate to a rational and selfish
behavior of the individual. Thus, these theories trigger decisions about how people should carry on and how
organizations should be organized and managed.

As per Horrigan (1987) states that there is a basic hole in financial theories because these theories
are considered ethically neutral. Thus, these theories are liable to standardize the financial decision of the
agents. In this way, if we all think in terms of modern finance decisions, they ought to be assessed ethically.
It reasons that "the world of modern finance is not a nice place from the ethical point of view".

While, the incorporated risk management in business and behavioral finance are particular zones
of finance that require analysis from ethics. In financial theories, for example, that of Modigliani and Miller,
and the Valuation of financial stocks CAPM the principle risk is foundational one, and this has limited the
need to deal with the specific risk, and hence the effect that business decisions have on workers and other
stakeholders that are significantly influenced by that risk. Nonetheless, currently in finance has valued the
significance of managing hazard, both fundamental and particular so as to make an incentive in the
organization by making an incentive for all stakeholders, not just shareholders. Therefore, finance theories
must develop toward this path keeping in mind the end goal to dependably speak to the organization's
financial reality.

Besides, this paper also contributes that the lack of explanatory power through the theories of the
firm and promote purely financial theories clarifying financial events from ethical discipline. As of now the
areas where ethics arouse grater interest in finance are the accompanying ones:

a) Creative accounting, revenue management and financial analysis misleading.

b) The insider trading, securities fraud and manipulation of financial markets.

c) The executive compensation: concerns excessive payments made to company CEOs and senior
management.

d) Bribery, bribery and facilitation payments: while these may be in the interests (short-term) of the
company and its shareholders, these practices may be anti-competitive or may violate the values of society.
5.2 Finance Globalization

This paper contributes that the globalization has affected the business estimate and authoritative
intricacy; and presently bigger economic and legitimate structures are more complex. Corporate finance is
changed, somewhat in view of the phenomenon of financial globalization because of the fact that the
financial integration has influenced and developed them significantly. From one perspective,
internationalized financial related firms has extended their financial framework, fundamentally on the
grounds that the new financial opportunities and threats, which require a more complex and developed
financial strategic perspective. The financial related territory is winding up more incorporated into
corporate technique (Lessard, 1991), with the goal that the finance team goes up against an ever increasing
number of duties in view of dynamic investment in defining the objectives and strategies of the business.

In addition, financial globalization may reduce the risk premium and enhance corporate
governance. It likewise implies that organizations can go to foreign markets to get funding sources (Brealey
et al., 2006), that grants expanded levels of financial funding at lower cost (Stulz, 1999, Chari and Henry,
2004), and accomplish more noteworthy profit for financial investment (Solnik, 1998; Errunza, 2001). In
addition, the liberalization of financial markets has encouraged the activation of reserve savings and
proficient area of venture and portfolio diversification. All these are aspects related to the financial
economy. Yet in addition, all the more particularly, globalization influences the systematic risk, or "beta"
of organizations. In this way, a few researchers including Stulz (1999) find that organizations with access
to worldwide capital markets, whose profitability is tied more closely to domestic markets to the global
economy, should consider the use of a global CAPM to reflect precisely the new reality of a global cost of
a decided capital.

Refer to Kose et al., 2006, there is no causal link between the clear and unambiguous globalization
and economic growth. However, the sensible however gives us a reality of global financial globalism, which
will most likely influence budgetary financial matters and corporate finance. Accordingly, the procedure of
financial globalization cultivates the need to develop theories and more effective financial techniques in
sensible global financial markets to become more competitive companies from the most operational to
strategic.
5.3 New Information and Communication Technologies in Finance

Refer to Brynjolfsson and Hitt, 2000; Oliner and Sichel, 2000, the impacts of ICT are upgrades in
profitability development and economic growth at the firm level. The traditional management of the
organization develops towards managing peoples and procedures in which the utilization of computerized
gadgets and the Internet is fundamental. The new plan of action depends on digital communication
strategies in which the functions of the organization, among them additionally the financial function needs
and requires the development of ICT. In this specific situation, the technologies ought to be considered as
instruments that have advanced the difference in the organization's financial function. This variable has
driven the best approach to do finance, not just as far as how to manage with the assets and financial
instruments, yet additionally making new innovation needs to which we should react from electronic
financial management.

Besides, this paper also contributes the use of ICT in financial economics it is possible to conclude
that research is needed to explore the extent and shape in which level ICTs are used as tools by financial
managers in enterprises. In this manner, in an examination setting it has established outcomes in regards to
the relationship between bank size and the use of various advancements for the giving of credits to
independent ventures (Berger and Black, 2011; Fanjul and Valdunciel, 2009). Likewise as far as complex
calculations that are utilized as tools for the benefit of financial instruments, for instance, in a few seconds
you can make a request on the share trading system, and in other few seconds a sell order, called "quoted
stuffing" (Kabir, 2010). The ICTs joining is essential in corporate finance identified with the effective
management of cash positions and advancement of the financing of shortfalls and investment of surplus.
ICTs additionally permit and enhance the simulations to compare the hiring financial risks covering
products.

5.4 Stakeholder Responsibility and Corporate Governance

As of late, our comprehension of corporate governance has been advanced by new insights of
knowledge into the issue that the advancement of the organization has brought. As a result, "the
governments approach from the point of view of shareholder (shareholder model), preservation situated
financial capital, has surrendered its predominance in corporate finance to approach the issue from the point
of view of all stakeholders (stakeholder model), concentrated on hierarchical capital preservation.
 The vision of the issue comes from government rethinking the idea of proprietorship, value creation
is an aftereffect of the synergies that happen between the different factors of production, as in the positive
agency theory. The stakeholder approach depends on the investors are by all account not the only leftover
petitioners of deficient contracts. In this manner, the property is characterized both by residual decision
rights as the appropriation of residual income, with the goal that those partners who are appointed a leftover
energy of decision to better exploit their personal knowledge, become partially owners. In this sense,
stretching out the examination to the diverse stakeholders turns into another plan of action in which it is
considered as a mix of commonly specific resources and individuals and the issue of governance
concentrates on ability to make an incentive for all stakeholders.

While according to the findings of this article, in this setting the modern theory of finance operates
under the suspicion that the primary goal of the organization is to maximize the wealth of its shareholder,
which converts into boosting the ordinary shares of the company. In this way, financial theories merge on
recommendations in which organizations ought to be controlled by shareholders and ought to be overseen
from an arrangement point of view with a specific end goal to maximize shareholder wealth. While the
target customarily upgraded by shareholders is profit maximization; be that as it may it is insufficient for
the present organizations. In this sense, the objective of the organization is to some degree more extensive
than the benefit, which incorporates the services it gives to the group in which it works acquiring a long-
term commitment to this community (social and environmental criteria) that will allow survive over time.

To sum up, highlight the diversity of areas covered by the financial economy and the new trends in
their study, in line with the social changes taking place.