By: PGIM
Autumn, 2019
The modern firm is one of society’s most powerful inventions, with more than 50% of economic transactions taking place internally within firms rather than through market mechanisms.1 The decisions made by firms are major drivers of value creation and destruction – and matter immensely to long-term investors given over half of a typical institutional portfolio is comprised of corporates.2
This is especially true today, as a host of disruptive factors are leading to the emergence of new business models that use dramatically different factors of production, leverage new technologies and network effects to aggressively dominate markets, and are governed by a new and evolving set of stakeholders pushing for broader social purpose beyond near-term profit maximization