FIN516 Corporate Finance

Discuss the role of corporate ethics guidelines and policies, and the relationship that may exist between ethics and share price. Research at least one company that was listed in ASX top 200 for 2016 and include in your discussion that company’s corporate ethics guidelines and policies. Incorporating the movement in share price of the company evaluate if there existed any relationship between ethics and share price of this company.

Find the monthly opening and closing prices for the period 1 Jan 2016 – 31 Dec 2016 for Blackmores Limited (BKL.AX), and Medibank Private Limited (MPL.AX) and the Market as proxied by the All Ordinaries index (^AORD).

Toyota motor corp is functioning its operations in the market of Australia form last 50 years. It has been studied that this company is among the top leading companies in automotive industry. In 2012, a study depicts that Toyota has the biggest market share. Company is having a market share of 18.2% from last several years. This company manufactures, distributes, assembles, imports and replaces the several parts of cars and other automobile in Australian market (Bloomberg, 2017). Many other services are also offered by the company such as cleaning, drive train, filters, fluids and engine. Further, it plans car servicing in country. Previously it used to recognize as Toyota Motor Sales Australia Limited (Toyota, 2017). This company is a subsidiary of Toyota Motor Corporation.

Corporate ethics guidelines role:

Corporate ethics is an expert method or function all morals that inspect entire ethical issues and some moral principles that ascend in a corporation atmosphere. Corporate ethics relates to entire basics of corporate manner and related manner of an individual or the whole society. It is an appropriate learning of corporate policies and practices about the possible provocative disputes like corporate governance, fiduciary responsibility, insider trading and corporate social responsibility.

Corporate ethics is very vital for all the corporate to track the trade smoothly. If a company is functioning morally then it would make an impact over the goodwill of the company.  Corporate ethics inspect the right principles of business atmosphere. In Toyota, corporate ethics has been followed by the company on huge level (Toyota, 2017). Company’s entire employees and manager are said to strictly follow the values of association and philosophy of an organization. The strategies of Toyota Motor corp are also strict. Succeeding there is some role that has been achieved in Toyota in concern of corporate ethics:

Leadership ethics:

It has been used by Toyota motor corp to manage, function and inspire the workers that could make an influence over loyalty and self-esteem of labors. This corporate ethics show to the leaders and managers that they should proceed with already dogged discipline way and in a satisfactory behavior for entire workforce in organization.

Benefits to the organization:

A strong and optimistic culture expands self-esteem of employees in Toyota Motor corp to improve workers retention, efficiency etc. It also has some financial assistance for the society and company. The huge level of employees’ efficiency increases the effectiveness of company and makes a reduction in workers turnover.  This corporate ethics shows regarding the company that workers must be inspired by leaders for completing the work on time (Toyota, 2017).

Ethical organizational culture:

The leaders and manager beliefs have been used by the Toyota motor corp for better management of company’s philosophy and guarantee that work force has achieved their duties with inspiration. Corporate ethics represent that work force must be encouraged by leaders and mangers to complete their task (Hogarth, Javitt & Melzer, 2008).

Employee ethics:

It has been used by the company, Toyota to set up ethical behavior midst entire work force to confirm that workforce finish their mission and duties in provided time period with full of reliability and honesty. Corporate ethics describe to the company that and workers must monitor and control in a truthful way to complete their mission.

Relationship between share price and ethics:

Corporations that are with a resilient character in positions of morals, incline to accomplish and sustain high consummation degree of investors. It has been definitely influenced the effects of investment of an association. Absence of specialized and particular ethics can lead towards negative financial result. It has been studied that if a business confirms that the moral behavior of the business is good than it could enhance the price of shares and monetary presentation of business (Business ethics case analysis, 2004).

A business’s share price could be varied with updating of any moral matters in the business. Presently many moral issues are challenged by company (Toyota). It has been analyzed that because of that problems the market price of shares of Toyota has been reduced as every time whenever a company needed few deposit to increase the procedures or expand the market of company. Through a study it has also been analyzed that if some ethical issues would be confronted by firm then the reliance of the investors will be less and it would impact over the divestment of investors from company and thus market price of shares of the company would be impacted. The share price will decline (Jiashu, 2009).

It has been acknowledged that the depositor would react damagingly at the time of knowing about ethical issues in Toyota Motor corp. Toyota has paid a good surplustoshareholdersfor savingthe comapny from the declining of share price butshare price has been impacted. It could be seen in the annual report of the company (Brown, Beekes & Verhoeven, 2011).A study says that if moral issues would be confronted by companies then trust of the shareholders will less and hence investors would divest their amount from the company and market share price would decline.

Through the analysis of financial data, facts and figures and many studies it has been established that market price of shares of the business was minimum because of many ethical concerns in organization. It shows that inside atmosphere of business also kind an effect over the outside atmosphere of business.

By doing this analysis over the Toyota it could be said that corporate morals is an imperative element of an association. It is obligatory by business to improve information of managers, leaders, inspire employees, improve culture of an association and reduce the worker throughput of business. It also assists the Toyota to enhance the financial situation of a company. If a business faces some ethical issues like Toyota Motor corp than market share price of business get change because of less confidence in company of investors. So it could be said that ethical issues makes an impact over market price of shares.

In first option, whole sum could be get by lottery winner instantly. Hence the amount of interest would not be useful for this.In this option, the whole amount can be get by lottery winner for entire life. So the rate of interest amount would be useful for it. The oblique real annual rate in this situation will be as follows:

In this option, the interest total can be acquired by lottery winner for a period of 5 years. Hence the amount and rate will be useful for it. The oblique real annual rate in this situation

Through this study, it has been examined that both BKL and MPL companies are executing very fine in market. The BKL’s market return explain that mostly company is contributing negative returns to stakeholders but the return offered by the business is not good in terms of investment in corporation(yahoo finance, 2017). At the same time, MPL’s return show that the business proposals an excessive return to stockholders and average return of business is quite good.

The monthly return of holding period of BKL and MPL is -0.45763 and 0.1235respectively (yahoo finance, 2017).So it has been proposed to investors to make an investment in their total in MKL’s assets (Brealey, Myers& Marcus, 2007).

Portfolio of both BKL and MPL has been examined to form the investment. But if the portfolio would be prepared for both companies so it would be found that if stakeholder will devote 40% and 60% in BKL and MPL then return would be supreme. 

So it is suggested to the stockholder to finance in portfolio of BKL and MPL stock to enhance the yield.

This study of portfolio and assets obviously show that an ordinary stockholder must finance in the MPL their amount and portfolio of both the stocks should be equipped on the base of 40% and 60%. Stagnant if a stockholder need to bar from the hazard and need to get lowest return on regular base then it is advised to nominee to finance in BKL as the beta of this is slighter than the MPL’s beta. 

So it has been suggested to stockholder to make an investment in BKL as if risk staples to investor while if investors are prepared to pursue the risk to acquire additional return so they must finance money in MPL(Hogarth, Javitt & Melzer, 2008). MPL’s return is advanced than return of market. It shows that the progress of the company is eye-catching for investors.

References:

Hogarth, S., Javitt, G., &Melzer, D. (2008). The current landscape for direct-to-consumer genetic testing: legal, ethical, and policy issues. Annu. Rev. Genomics Hum. Genet., 9, 161-182.

Davies, T. and Crawford, I., 2011. Business accounting and finance. Pearson.

Brown, P., Beekes, W., &Verhoeven, P. (2011). Corporate governance, accounting and finance: A review. Accounting & finance, 51(1), 96-172.

Jiashu, G. (2009). Study on Fair Value Accounting——on the essential characteristics of financial accounting [J]. Accounting Research, 5, 003.

Brealey, R., Myers, S. C., & Marcus, A. J. (2007). FundamentalsofCorporate Finance. McGraw Hill, New York.

Business ethics case analysis. (2004). Retrieved as on 28 April 2017 from http://businessethicscases.blogspot.in/2014/02/toyota-acceleration-concerns-decelerate_6627.html

Yahoo finance. (2017). AORD. Retrieved as on 28 April 2017 from https://au.finance.yahoo.com/quote/%5EAORD/history?period1=1451586600&period2=1483122600&interval=1mo&filter=history&frequency=1mo

Yahoo finance. (2017). BKL. Retrieved as on 28 April 2017 from https://in.finance.yahoo.com/quote/%5EBKL/history?p=^BKL

Yahoo finance. (2017). MPL. Retrieved as on 28 April 2017 from https://au.finance.yahoo.com/quote/MPL.AX/history?p=MPL.AX

Toyota. (2017). Company. Retrieved as on 28 April 2017 from http://www.toyota.com.au/toyota/company

Bloomberg. (2017). Toyota. Retrieved as on 28 April 2017 from https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=22511542