BAFN200 Principles of Finance Assignment

Added on - 30 Oct 2019

Corporate Social Responsibility and Financial Performance

This report is based on "corporate social responsibility and financial performance". In this report, we will discuss Aveo’s financial management policies and practices with respect to their social responsibility and the social outcomes of their actions. This study is about the financing decision of Aveo Group Limited which has been in the field of re-establishing retirement communities for the last 25 years. Aveo as an investment proposition will also be discussed. In this "corporate social responsibility pdf" report causes of volatility in the share prices of Aveo Limited will explain.

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Running head: AVEO GROUP LIMITED AND ITS POLICIESAveo Group Limited and its PoliciesStudent’s Name:University Name:Author Note
1AVEO GROUP LIMITED AND ITS POLICIESTable of ContentsIntroduction................................................................................................................................2Aveo’s financial management policies and practices with respect to their social responsibilityand social outcomes of their actions:.........................................................................................2Aveo as an investment proposition............................................................................................3Causes of volatility in the share prices of Aveo Limited:..........................................................5Conclusion..................................................................................................................................6References..................................................................................................................................7
2AVEO GROUP LIMITED AND ITS POLICIESIntroductionThis study is about Aveo Group Limited which has been in the field of re-establishingretirement communities for the last 25 years. Not only Aveo Group has re-established butalso developed and managed the living of senior community. Aveo Group hasaccommodations all over Australia including the suburban areas, main country and coastalareas.In this project it has been mentioned that according to the Four Corners study Aveowas accused of ripping off customers almost all of them elderly and vulnerable at itsretirement villages. There are also allegations that Aveo had in place complex contracts andexorbitant fees.Therefore this study aims to look into the inside happenings that lead to such ashameful result. Here in this project the financial management policies and practices withrespect to their social responsibility and social outcome is evaluated and Aveo as aninvestment proposition has also been discussed.Aveo’s financial management policies and practices with respect to their socialresponsibility and social outcomes of their actions:Financial management policies of Aveo group Limited should be such that, it does nothamper the social duties performed or the responsibilities towards its environment in which itoperates is not disturbed (Lanis and Richardson 2012). But in reality this might not be thescenario (Hilson 2012). In present times the situation is such that the economic, social andenvironmental concerns are becoming a mandate concern for the companies and in order tomaintain it the entire system or operational hierarchy is required to be integrated ordisintegrated as the case may be(Brigham and Houston 2012).Generally there exists a positive relationship between financial management policiesand corporate social responsibilities performed, but in case of Aveo Group Limited thereexists an anomaly (Brigham 2014). Aveo Group Limited as a company neither couldmaintain financial management policies nor could maintain CSR because the financialpolicies were not in accordance to the stakeholder theory that is each and every stakeholderof business should be treated equally and should be given equal amount of rights in decisionmaking of the organization (Brigham and Ehrhardt 2013). Now as a stakeholder is a part of
3AVEO GROUP LIMITED AND ITS POLICIESthe company, therefore his or her welfare falls under the domain of Corporate SocialResponsibility, thus the CSR duties of Aveo were also hampered (Higgins 2012). Thisultimately led to reduced profits and increase in the burden of liabilities which very naturallyforced the company to rob its customers out of their money in the form of exorbitant fees andother means (Petty et al. 2015).Experts in this domain of study are of the opinion that a good CSR record results inincrease in employment or employment desirability in the company and also an increase inthe rate of investment in the company (Mathuva 2015). But Aveo, in relation to this matterfailed in both respects, that is, it neither had a good CSR record nor did it have a properstakeholder theory to utilize, which led to further problems (Aguinis and Glavas, 2012).Another cause that led to the downfall of Aveo Group Limited is that the statisticalanalysis might not be done properly, that is, it might not be free of errors and also theexclusion of investment from the research and development domain might be another reason(Epstein and Buhovac 2014). Some of the policies that are implemented by the company areIntegrity in Corporate Reporting, Timely and Balanced disclosure and Security holderengagement. Integrity in corporate reporting refers to the policy in which the company hasarranged to set up an Audit and Risk Committee which will work according to the laid downreferences approved by the Board of Directors. On the other hand Timely and BalancedDisclosure is another policy set up by the group in which there is a provision ofcommunication policy as well, both of which are established with the intention of checkingthe compliance of the company operations with the periodical disclosure requirements of theCorporations Act and the ASX Listing rules (Edmans 2012). The last policy that is beingdiscussed in this study is the Security holder engagement policy which has been establishedby the group keeping the stakeholder theory in mind. This policy aims to keep the securityholders informed about the important decisions and major developments that is going on inthe company. Now these three policies though appear to have a strong hold on the ethical andoperational scope of the company did not really help Aveo in reducing its liabilities orincreasing its profit. Though the policies were essentially created with an aim to enhance theoperating profit of the firm and improve the level of CSR as well (Kim, Park and Wier 2012).
4AVEO GROUP LIMITED AND ITS POLICIESAveo as an investment propositionAfter the investigation conducted by the Four Corners, it came into light that the 11.5percent plunge in share price of the company was due to the unreasonable fees claimed by thegroup from its customers. Shares ofAveo Group have observed a fine change of -0.40% or -0.01 in the most recent times. With time as the earning season comes to an end, investorslook for companies which have a steady track record. Aveo Group Limited will surely looseon a huge base of investors for the negative feedback that has been published. Currently, the14-day Average Directional Index (ADX) for Aveo Group is presently at 20.98. Generally anADX ranging from 0-25 would mean that it is an absent or weak trend. A value of 25-50would mostly interpret a strong trend. A value of 50-75 would mean a strong trend, and lastlya range of 75-100 would result in an extremely strong trend. ADX is particularly utilized tomeasure trend strength but not direction. The data calculates as per the exhibit has been givenin Appendix(CSRHub - Sustainability and Corporate Social Responsiblity(CSR) ratings on over 17,487 of the world’s largest public and privatecompanies., 2017).In addition as per the data calculated on stock prices, the price has been taken fromSeptember 2015 till August 2017. There has been a vital fluctuation in the stock prices.However, as per the base line of 5% in the stock return, the fluctuation has been within thelimit except the fluctuation in June which had crossed the base line and then furtherdecreased as it has been accused of ripping the retirement villages which extended itsvolatility. On the contrary, the volatility has been received maximum in the last month that isAugust 2017, explaining the investment is not clear because of their fees and confusingcontracts.
5AVEO GROUP LIMITED AND ITS POLICIES9/2/20159/28/201510/21/201511/16/201512/10/20151/7/20162/3/20162/29/20163/28/20164/22/20165/19/20166/15/20167/11/20168/4/20168/30/20169/23/201610/18/201611/13/201612/7/20161/5/20172/1/20172/27/20173/23/20174/21/20175/18/20176/14/20177/10/20178/3/20178/29/2017-15.00%-10.00%-5.00%0.00%5.00%10.00%15.00%Stock ReturnsStock ReturnsFigure 1: Stock Returns of AveoOn the other hand, the traded volume of Aveo has been fluctuating and showing thechanges to be 92.69% in traded volume which creates an unpleasant environment forinvestment and that is why the fluctuations has been rampant. Also, because of the stockprices being wildly ranging the change in trade volumes has been irregular.9/2/201510/11/201511/18/201512/29/20152/9/20163/20/20165/3/20166/10/20167/21/20168/30/201610/6/201611/15/201612/27/20162/7/20173/19/20175/2/20176/9/20177/20/20178/29/20170400000080000001200000016000000Traded VolumeTraded VolumeAxis TitleAxis TitleFigure 2: Traded Volumes of Aveo
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Financial Management Practices PDF

From the above corporate social responsibility pdf report "financial management practices pdf", we conclude that Aveo Group Limited, as a result of the misdeed committed by the company led to total disaster both in terms of its goodwill and total revenue incurred or operating profit. As it has been observed in the study Aveo Group Limited though had implemented financial management policies but they were not in accordance with the corporate social responsibilities or duties that the company had to perform in the due course of time. The management policies introduced by the company like corporate reporting and timely balanced disclosure were not implemented properly.