Magdalena Mikołajek-Gocejna

An increasing number of investors want to invest their capital not only with profit but also responsibly, and they pay significant attention to the formula of socially responsible investing (SRI), which means that they consciously engage their funds in companies operating in accordance with CSR principles. An important influence on the development of CSR is the role of stock exchange indices on socially responsible companies. These indices can be considered specific tools for adapting this concept in practice, in particular in the field of socially responsible investment. This article provides a comparative analysis of the social, environmental and governance criteria underlying the definition of the composition of selected European SRI indices. The research will cover the following indices: the DJSI Europe Index, the FTSE4Good Europe 40, the FTSE4Good Europe 50, the EURO STOXX Sustainability 40 and the Solactive Sustainability Index Europe. This paper also intends to set an index r...

Investor expectations about the course of future economic processes are one of the key factors influencing their decisions. It seems that expectations play a particular role because they constitute unobservable variables that can account for observable economic phenomena. Getting to know the process of how investor expectations are formed is a crucial element of description, interpretation and forecasting changes in the value of assets on financial markets, and especially changes in stock prices on capital markets which affect the value of publicly traded companies. The aim of this paper is to present the psychological factors shaping investor expectations and influencing the market value of companies, factors determining both the motivational and cognitive inclinations of investors. The main questions that arise from the background of the analysis conducted in this paper are: 1. whether awareness of the psychological determinants of investment decisions enables companies to conscio...

The main hypothesis of this book assumes there exists a statistically important correlation between information asymmetry and the level of openness with information in companies listed on the Warsaw Stock Exchange (WSE) (H 1 ) and that there exists a statistically important relationship between the asymmetry index of investor relations (AIR) and the formation of investors’ expectations (H 2 ).

The bases of Expectations-Based Management (EBM™) have been developed by Copeland and Dolgoff. The authors looked for such a model of management that would guarantee the generation of shareholder value, but in the modern meaning of value creation, i.e. anticipating market expectations with respect to the achieved results. Economic profit, extensively used in the concept of value based management, is unquestionably an important and useful measure, but it is not free of faults. As it has been mentioned earlier, there is a need to include investors’ expectations in the evaluation of a company’s results and to take into account the influence that expectations have on the market price of stock. The calculation formula of economic profit does not take into account investors’ expectations. For this reason, when a company has achieved positive results with regard to economic profit, it has generated value, but it has not generated shareholder value, because it does not refer to the minimum EP required and expected by shareholders. So, let’s assume that two companies achieve identical economic profit, for instance they gain 20 % on the invested capital, and that the cost of capital for both companies equals 10 %. In both cases, value has been created. However, if we take a close look at investors’ expectations about the return, it might turn out that in the first case, investors expected a rate of 15 %, which means that when the company has made a 20 % profit, it exceeded their expectations. Let us say that in the second case, investors expected 30 %, so the company has not managed to beat market expectations. As a result, the return higher than expected will cause a rise in stock prices on the capital market, and in the second case, the positive EP notwithstanding, stock prices will drop because the company has not exceeded market expectations.

The multiplication of the invested capital is investors’ fundamental goal. They can achieve it, if they learn or develop themselves methods that would enable them to forecast changes on financial markets as accurately as possible. One of the most common elements of modelling expectations is referring to historical data. They are usually interpreted via technical analysis, which aims at forecasting future price trends on the basis of past market activity. The technical analysis model assumes that prices of securities change according to repeatable, observable cycles, which create geometric shapes when represented in charts.

The considerations regarding investors’ expectations and their purposeful creation through providing capital markets with reliable and accurate information should also include such important issues as information asymmetry and efficiency on the capital market.

One of the most significant factors affecting investors’ decisions are expectations concerning the future. In economics expectations are defined as forecasts of future events, which influence decision-making. The first known mention of economic expectations was recorded in Ancient Greece. In Politics, Aristotle wrote about Thales of Miletus (636–546 BC) who made considerable profit from an accurate forecast of future olive harvest.

One of the most prominent features of the economy and business activity in recent years has been rapidly growing uncertainty. With increasing frequency, businesses, countries, and entire regions are surprised by unexpected series of events and destructive economic phenomena which are difficult to predict and control. The twenty-first century is undoubtedly the time of unprecedented increase in uncertainty and risk of conducting business activity (Herman 2006: 21). A new approach to changes emerged as many key sources of change activated; what constituted a complete novelty were not the sources themselves, but their coincident activity (Suszynski 2007: 40), particularly in the area of deregulation (opening) of markets and new technologies. Uncertainty and instability are therefore the characteristics of the contemporary economy which result, above all, from exceptional volatility, depth, intensity and unprecedented dynamism of innovation, including financial innovation, as well as changes and technological progress occurring worldwide. These are accompanied by unsustainable economic growth and deepening development disproportions at the global scale (Mączynska n.d.). Overlapping phenomena and processes connected with this activity increased the likelihood of changes, their frequency and amplitude. At the same time, a distinct decrease in predictability of changes and their discontinuity lead to an increasing risk of unexpected consequences (Mączynska n.d.). Thus, gaining knowledge about forthcoming changes provides opportunities for considerable profit, and companies which fully utilise the basic tool of information access and processing gain strategic advantage. An increasing number of economies is rapidly moving from industrial society towards information society with a pronounced tendency for a creation of a global information society (Herman and Szablewski 1999: 14). This phenomenon determines the shift in the role and hierarchy of factors of production. Globalisation increases the demand for intellectual capital, which nowadays becomes the basic factor determining competitiveness of companies and economies. Globalisation facilitates implementation of intellectual capital and boosts the impact of its performance (cf. Szymanski 2004: 58). Consequently, at the current stage of globalisation, information and knowledge play a prominent role as leading factors of production.

Measurement of value creation is not simple. The increase in shareholder value will not necessarily mean its creation, because the creation of shareholder value can be defined more or less rigorously. The article focuses attention on market metrics of value: market value added (MVA) and total shareholder return (TSR), as measures most directly related to the concept of creation of value for shareholders. It also describes a distinction between the concept of value creation and value creation for shareholders, discussing their excess forms as well.

Proper design of managers' remuneration package and information openness in this area have become an increasingly urgent business need, in the time of recent crisis, both in terms of motivating managers to create business value, and rebuilding investors' trust in companies' management and the entire financial market. An effective incentive programme, focusing on key success factors for the organization, binds executives' and shareholders' objectives, as well as permits to link key people with the company and to attract the best employees in the market

Pomiar efektow tworzenia wartosci dla akcjonariuszy nie jest prosty. Nalezy bowiem pamietac, ze wzrost wartosci da akcjonariuszy nie zawsze oznacza jej kreacje, poniewaz ta ostatnia moze byc zdefiniowana mniej lub bardziej rygorystycznie. Inwestycja tworzy wartosc wtedy, gdy stopa zwrotu z kapitalu, ktory ja finansuje, przewyzsza stope kosztu tego kapitalu. W artykule skupiono uwage na rynkowych miernikach wartosci: rynkowej wartosci dodanej (MVA) oraz calkowitym zwrocie dla akcjonariuszy (TSR) jako miarach w sposob najbardziej bezposredni odnoszacych sie do pojecia kreacji wartosci dla akcjonariuszy, przy czym dokonano rozroznienia pomiedzy pojeciem tworzenia wartosci dla akcjonariuszy a tworzeniem wartosci spolki (chodzi o rozroznienie pomiedzy wartoscia kreowana przez inwestycje akcjonariuszy w walory spolki oraz wartoscia tworzona przez inwestycje w jej aktywa). W artykule zostala przestawiona krotka analiza rynkowych miernikow wartosci spolek sektora paliwowego notowanych na GP...

Socially responsible investment (SRI) has experienced strong growth in recent years. In 2012, $1 out of every $9 US assets under professional management was invested in some form of sustainable investment.1 Global sustainable investment assets have expanded dramatically, rising from $13.3 trillion at the outset of 2012 to reach a total of $21.4 trillion at the start of 2014. Most of the SRI assets are in Europe (63.7 percent), but the relative contribution of the United States has increased from 28.2 percent in 2012 to 30.8 percent in 2014, and over this two-year period, the fastest growing region has been the United States, followed by Canada and Europe. These three regions are also the largest regions in terms of assets, accounting for 99 percent of global SRI.2 With this growth one most important issues is whether it pays for organizations to concern themselves with social responsibility, and whether there are any tradeoffs to sustainable investing. Much of the present research o...

The article analyzes the course of the unprecedented economic crisis in the last century caused by the outbreak of the COVID-19 pandemic around the world. The COVID-19 pandemic affects all spheres of economic life, causing a huge collapse in international trade, a collapse in industrial production , and a reduction in the infl ow of services and foreign investments. The aim of the article is to analyze the causes and the counteraction of the European Union's breakdown in international trade turnover in 2020. The analysis uses a qualitative and quantitative method consisting in a review of international trade figures, statistics from Eurostat, World Trade Organization, IMF, and World Bank. The analysis examines the depth of the collapse of international trade, the most important entities in trade, including the European Union. The results of the economic analysis allow understanding the activities of the European Union institutions in the field of counteracting the negative effec...

Investor expectations about the course of future economic processes are one of the key factors influencing their decisions. It seems that expectations play a particular role because they constitute unobservable variables that can account for observable economic phenomena. Getting to know the process of how investor expectations are formed is a crucial element of description, interpretation and forecasting changes in the value of assets on financial markets, and especially changes in stock prices on capital markets which affect the value of publicly traded companies. The aim of this paper is to present the psychological factors shaping investor expectations and influencing the market value of companies, factors determining both the motivational and cognitive inclinations of investors. The main questions that arise from the background of the analysis conducted in this paper are: 1. whether awareness of the psychological determinants of investment decisions enables companies to consciously create long-term investor expectations, inspiring, in a sense, a more fundamental response from the capital market, 2. whether there is the potential to include investor expectations in the value-based management process and to make the transition from value-based management to expectations-based management.

The purpose of the work is to establish a relationship between the information
asymmetry and the level of enterprise’s willingness to disclose information and between the
asymmetry index of investor relation (AIR) and the metrics describing the value of investors’
expectations in companies listed on the Warsaw Stock Exchange. Publicly traded companies
have a major influence over the indices of information asymmetry in relations to external
shareholders. For this reason, for the purpose of this study an asymmetry index of investor
relations (AIR) has been constructed. This metric represents a company’s ability to convey
information about its operations. AIR was based solely on the guidelines of value reporting as
proposed in the IC Rating™ Model [Jacobsen et al. 2005]. Adopting the IC Rating Model as
a basis for the AIR allowed to encompass all the information voluntarily disclosed by companies
to the market, and not only the disclosures required by legal regulations. As the metrics
describing the value of investors’ expectations were used: cost of equity (CE), future EVA
growth (FGV) and threshold market value added (threshold MVA). The study has been based
on stock market data, financial reports, and an analysis of the information published on the
websites of companies listed on the Warsaw Stock Exchange within the continuous trading
system, and for which all data necessary for the relevant calculations were available. As it has
been revealed there exist statistically significant correlations between asymmetry indicators
and investors’ expectations. Companies with a high willingness to disclose information are
more capable of creating investors’ expectations. There are also statistically significant correlations
between the indicators that represent the level of information asymmetry in investor
relations (AIR) and companies’ results

Socially responsible investment (SRI) has experienced strong growth in recent years. In 2012, $1 out of every $9 US assets under professional management was invested in some form of sustainable investment. 1 Global sustainable investment assets have expanded dramatically, rising from $13.3 trillion at the outset of 2012 to reach a total of $21.4 trillion at the start of 2014. Most of the SRI assets are in Europe (63.7 percent), but the relative contribution of the United States has increased from 28.2 percent in 2012 to 30.8 percent in 2014, and over this two-year period, the fastest growing region has been the United States, followed by Canada and Europe. These three regions are also the largest regions in terms of assets, accounting for 99 percent of global SRI. 2 With this growth one most important issues is whether it pays for organizations to concern themselves with social responsibility, and whether there are any tradeoffs to sustainable investing. Much of the present research on this question is based on the views of Friedman and Freeman. But changes in economic development, national and local security, and the growing expectations

The economic slowdown has brought about dramatic consequences in many countries: non-repayable debts, extreme difficulties for individuals and businesses in obtaining credit, bankruptcies, investor distrust and falls in global stock markets, government bailouts against banks and other financial institutions at risk of failure. In fact, the crisis would probably not have taken place without some political decisions, related to monetary and economic policy, as well as insufficient regulation and monitoring. It can be said that during the crisis, the " invisible hand " of free market turned to " stealing hand " through market games driven by the irrational and irresponsible behaviors of politicians, creditors, and consumers. Current economic theory has been constructed on a foundation laid more than 200 years ago. The traditional economic and finance models are based on the premises of perfect competition, efficient markets, rational behaviors, and market equilibrium. This paradigm suggests that the " invisible hand " will work its magic to resolve all imbalances and bring the economy back to the steady-state equilibrium because market participants behave rationally. This article was inspired by Leibstein's hypothesis that homo oeconomicus is not a model case but extreme form of behavior that surfaces under extraordinary circumstances. The aim of this paper is an attempt to shift from the concept of homo economicus to the concept of homo altiore (holistic), trying to capture the whole complex nature of human beings.

The considerations regarding investors' expectations and their purposeful creation through providing capital markets with reliable and accurate information should also include such important issues as information asymmetry and efficiency on the capital market. 6.1. Information asymmetry Information asymmetry can be defined as an imbalance in the information available to the market participants. The problem of imperfect (incomplete) information and its implications was discussed as early as in the 19 th century by Marshall, in the context of imbalance between wages and the work actually performed by employees. The problem of information asymmetry appeared also in the works of Hayek, who, in an attempt to challenge the idea of centrally planned economy, proved that incomplete information leads to market inefficiency (Rosses 2003). In the 1960s and 1970s, the theory of information asymmetry, perceiving information asymmetry as an imbalance in the information available to the market participants, was elaborated. The notion of information asymmetry itself was introduced to economics by J.A. Mirrlees, who in 1996 was awarded the Nobel Prize for his studies on the relationship between private companies and the government in the context of information asymmetry. The 1996 Economic Sciences Nobel Prize was also co-awarded to W. Vickrey who focused on the analysis of auctions and transfer of rights to conduct business activity. Both economists pointed out that information asymmetry is frequently used to gain strategic advantage over market competitors and that the most important is to identify the hidden motives of market players. The phenomenon of information asymmetry was also studied by another Nobel Prize winner, R. Lucas, who in 1995 received the award for his hypothesis of rational expectations. Lucas proved that market agents act under uncertainty, imperfect information and costly information gathering, hence their investment decisions are not always rational, due to difficulties in responding to market signals, caused by information asymmetry. It seems that the best known researchers on the phenomenon of information asymmetry are G.A. Akerlof, M. Spence and J.E. Stiglitz, mainly because of their contribution to the elaboration and development of tools used in the analysis of the problem.

Putting the hypothesis of rational expectations to question resulted in an attempt to include irrational behaviour of investors in the financial market model. Let us remind that in classical models of the capital market (Sharpe's Single Index Model, Capital Asset Pricing Model (CAPM), International Capital Asset Pricing Model, Arbitrage Pricing Theory (APT), Portfolio Theory, etc.) irrational behaviour of actors was deemed unimportant. One of the first models to take into account the irrational character of participants of the capital market was drafted by H. Working in 1958. Working divided investors into two groups: a large group of well-informed investors and a small group of uninformed investors. Well-informed investors are able to reach information sooner than others. Uninformed investors need to rely on the noise and for this reason they may react immediately to fallacious information or react to actual information with a delay. As a result, fluctuations of share prices on the market extend over a period of time and they create short-term trends which are difficult to register by some instruments of technical analysis (Zielonka 2011). Working's work is moreover considered pioneer in the scope of risk management and hedging. Working pointed out that there existed various motivations and types of hedging; he argued that people who hedge themselves not always want to minimise risk (Working 1953). Consequently, he introduced a distinction between speculators and hedgers, as a criterion using only short-or middle-term storage of actual goods by the latter (Working 1962). The 1980s and 1990s brought the emergence of many descriptive models of markets that highlighted the role of technical analysis and its efficiency, which stemmed from the behaviour of investors who based their decision on information noise. J. L. Treynor and R. Ferguson concluded that achieving exceptional profits on the capital market is possible thanks to a combined analysis of past prices of assets and other valuable information. The authors, however, believe that such profits can be gained thanks to non-financial information, and past prices only make it possible to use this information efficiently (Treynor and Ferguson 1984, 1985). P. D. Brown and R. H. Jennings came to similar conclusions. They used a two-period dynamic model of equilibrium in order to demonstrate that rational investors use past prices of assets when formulating their expectations (Brown and Jennings 1989). The potential

Heuristics are efficient cognitive processes that ignore part of information. In classical view, heuristic decisions save effort, but imply greater errors then " rational " decisions, defined by logic and statistical model. It clearly emerges that in real life people do not always make rational decisions based on established preferences and complete information. In many ways their behavior thus contradicts the homo oeconomicus model. Much of the behaviour observed is caused through people trying to cope with the complexity of the world around them by approximating, because collating and evaluating all the factors of relevance to a decision overtaxes their mental processing capacity. These psychologically driven inadequacies also occur with investment decisions. Heuristics are simply a more effective way of evaluating choices in the rich and changing decision making environment investors must face. The aim of this paper is to review the impact of heuristics bias decision-making on capital market.