The Role of Finance in Corporate Strategy

Abstract

Finance allows organizations to quantitatively understand how a corporate strategic initiative affects corporate value. But some empirical studies available suggest that Chief Executive Officers do not find these linkages easily. The main objective of this study is to demystify finance and show how to use economic reasoning to enhance the quality of strategic decision making. The study is organized to focus on a variety of strategic financing decisions designed to maximize shareholder value creation and to revolve around literature review providing answers to the questions that managers frequently ask. This paper makes a deeper understanding of the financial frameworks for the CEO’s to monitor the implementation of their strategic decisions and ensure that they create value. Finance is an integral part of decisions. Moreover, since most realistic decisions are complex, any financial analysis is likely to have some limitations. Similarly, the monitoring of past decisions is critical to ensure that future opportunities for shareholder value creation are not missed and adequate resources are directed to promising investments while unpromising ones are reduced in scale or scope