Running head: GROUP 1 FAITH INTEGRATION
BUSI 530 Faith Integration
Sonia Abridello, Richmond Asare, Melissa Boling, Britney Brandon
Liberty University
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Introduction
In today’s constantly changing world, applying Christian values to finance is not an issue
that has been explored in depth. Companies and investors own many assets such as stocks,
bonds, derivatives, fixed assets, etc., with each bearing the possibitlity for return and risk. For
financial managers and investors to act in accordance with their Christian faith, they would first
have to learn from the biblical principles about the way they should act for good of others, not
the profit they stand to make. “Whoever loves money never has enough; whoever loves wealth is
never satisfied with their income. This too is meaningless.” (Ecclesiastes 5:10, New International
Version)
Goals and Corporate Governance
For organizations to be successful, they need to set up goals, which will be guide their
operations. In addition, they also need to have a good corporate governance which will function
to ensure that all the operations within the organization are in line with the goals of the
organization. Corporate governance and goals are the basis for the success of an organization.
The two work hand in hand where goals act as guidance for the governance of an organization to
make the organization achieve long term goals. Through corporate governance, the organization
will be controlled and directed towards the achievement of the objectives of the businesses
(O’Mahony & Mason, 2017). This is how they will lead to success of the company since the
objectives will be met through corporate governance.
Corporate governance is advantageous to an organization in that it ensures that there is
economic growth for the organization because of organizations performs well when it focuses on
its goals and objectives. Also, with good corporate governance, investors will feel attracted to
invest in the business and this will help in increasing the capital for the organization. This will
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then lead to a lower capital cost which is very attractive as it leads to a positive share price
(Yermack, 2017). As a result, organizations should be working to ensure that they have a good
corporate governance. This is what the bible advocates for. The Bible encourages us to set goals
as well as back them with good governance which will not give up and everything will be okay.
The success of anything we do will be down to the goals we set as well as the governance that
will be backing the goals. Chronicles 4:10 (New International Version), “But as for you, be
strong and do not give up, for your work will be rewarded.”
Company Value and Stocks
A company’s value and stock prices go hand in hand. When there is any change in the
value of stock, that change is also seen in the company’s overall value. This is why financial
managers and investors keep a close eye on stock prices. According to Brealey, Myers, and
Marcus (2018) stock prices and company values are the key determining factors in how
successful a company is performing currently and how successful they will perform in the future.
Sometimes, financial investors may want to invest in risky stocks with the hopes of receiving a
potentially large payoff, not only for the company, but also themselves. Financial managers who
own shares in the company they work for will be driven to increase the company’s market value.
However, the future is never certain, so managers must decide how much risk they are able to
accept (Arora & Marwaha, 2014).
Exodus 20:3 states, “You shall have no other gods before me.” Sometimes investors and
managers place the value of money before the needs of their clients and the company. Investors
must know the characteristics of which stocks have the potential for risk and return. High risk
stocks can go either way, having a big payoff or causing investors to lose money. God expects his
followers to only worship and glorify Him. When His followers begin to place the gods of
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materialism and profit before Him, they are not representing His best image. Any business
activities must be done to benefit all of society and Man should not be corrupted or exploited
simply by making a profit.
Valuing Bonds
Bonds are a form of debt security that represents debt obligations. An issuer of a bond is
receiving money as a loan and must be repaid after a set amount of time. The issuer of the bond
must pay the investors interest for the privilege of using their money (Hayes, 2018). Psalm
37:21(English Standard Version) says, “The wicked borrows and does not pay back, But the
righteous is gracious and gives.” Governments and corporations use bonds as a form of
borrowing money. Companies sell bonds to investors at face value. The face value is the amount
paid to the holder when the bond reaches maturity. The company pays a bond coupon which is an
interest payment based off the face value.
The value of bonds is determined by reducing the coupon payments and final repayment
by the yield to maturity on comparable bonds (Brealey, Myers, & Marcus, 2018). The yield to
maturity is the interest rate for which the present value of the bond payments equals the price. A
bond’s payments discounted at the bond’s yield to maturity equals the bond’s price (Brealey,
Myers, & Marcus, 2018). Price and yield to maturity vary inversely due to present values being
lower when discount rates are higher. A bond’s market price, maturity, coupon rate, and face
value can determine the yield to maturity of a bond.
Interest rate risk and credit risk should be assessed when investing in bonds (Nielsen,
2018). It is the risk of changes in interest rates which may increase or decrease the market value
of a bond. It rises when market interest rates fall and drops when market rates rise. Ephesians
5:15 (New International Version) says, “Be very careful, then, how you live-- not as unwise but
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as wise.” A long-term bond carries greater risk than a short-term. This is because the higher
inflation may reduce the value of payments. The overall interest rates could cause the bond’s
price to fall. A credit risk is the possibility that the bond owner will fail to make the required
payments for the debt. The credit risk indicates that the expected yield to maturity is greater than
the expected yield. Bond ratings measure the credit risk and the default premium is the amount
investors are required to bear a credit risk.
Ephesians 3:12 says, “In him and through faith in him we may approach God with
freedom and confidence.” Investors should consider the many factors associated with the
decision into purchasing a bond. There are methods in place to value bonds, so that investors can
confidently make good buying decisions. Jeremiah 17:7 says, “But blessed is the one who trusts
in the Lord, whose confidence is in him.” Investors should not only make wise decisions but
should also be confident in their choices.
Management and Dividend Decisions
Company managers are given a strong responsibility. They are depended on by the
company to make profitable and appropriate decisions to enhance business activity. With that
said, managers also hold a strong importance with investors, since their actions and decisions
help influence decisions on investing with a company. For this reason, a naturally developed trust
relationship occurs. Managers strive to enhance business activities for their investors, and
investors put strong faith in manager capabilities that their finances will be entrusted and utilized
in a mutually beneficial manner. Proverbs 27:17 (English Standard Version) states, “Iron
sharpens iron, and one man sharpens another.” One of those beneficial variables would be
dividend consistency.
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According to Brealey, Myers, and Marcus (2018) “Managers ‘smooth’ dividends and hate
to cut them back. Dividends tend to follow the growth in long-run, sustainable
earnings. Transitory fluctuations in earnings rarely affect dividend payouts” (p. 510). Companies
and their managers strive to continually provide reassurance to their shareholders that managers
are doing their best to maintain business stability and seeking gainful practices. Romans 15:4
states, “For whatever was written in former days was written for our instruction, that through
endurance and through the encouragement of the Scriptures we might have hope.” They also do
not want to give investors false hope by acting too prematurely. According to Chan, Powell, Shi,
and Smith (2018) “Companies therefore increase dividends only in response to a permanent
increase in earnings, not to a current rise in earnings if the dividend increase might subsequently
have to be rescinded should the earnings rise note be permanent” (p. 127). Managers take the
trust relationship between their company and its investors very seriously and work hard to
present an honest dedication to their partners. Psalm 111:8 “They are established forever and
ever, to be performed with faithfulness and uprightness.” Managers should concentrate on
betterment while not rushing their approach, something such as an increased dividend return that
will just be reverted in a short-time can lead to investor indecisions, and potential drops in the
market. According to Brealey, Myers, and Marcus (2018) “It is no surprise, therefore, to find
that the announcement of a dividend increase prompts a small rise in the stock price and that a
dividend cut results in a fall” (p. 510).
Conclusion
Finance professionals are faced with the difficult task making tough decisions that can
help or hinder the company or individual whom they are working for. Successful finance
professionals do not seek to only make large, short term profits, they have clear investment
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goals, decide the best time to invest, learns and understands the market, and the risk associated
with the assets (Arora & Marwaha, 2014). No matter what, these professionals must follow
through with good intentions and faithfulness to everyone but especially to God. As stated in 2
Corinthians 8 (New International Version) “But since you excel in everything—in faith, in
speech, in knowledge, in complete earnestness and in the love we have kindled in you[a]—see
that you also excel in this grace of giving.”
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References
Arora, S., & Marwaha, K. (2014). Variables influencing preferences for stocks (high risk
investment) vis-à-vis fixed deposits (low-risk investment). International Journal of Law
and Management,56(4), 333-343. doi:10.1108/ijlma-07-2013-0032
Brealey, R. A., Myers, S. C., & Marcus, A. J. (2018). Fundamentals of corporate
finance (9th ed.). New York, NY: McGraw-Hill.
Chan, K. F., Powell, J. G., Shi, J., & Smith, T. (2018). Dividend persistence and dividend
behavior. Accounting and Finance, 58, 127-147. Retrieved from https://onlinelibrary-
wiley-com.ezproxy.liberty.edu/doi/epdf/10.1111/acfi.12208
Hayes, A. (2018). Bond:Basics: What are Bonds?. Investopedia. Retrieved
from:https://www.investopedia.com/university/bonds/bonds1.asp
O’Mahony, J., & Mason, M. (2017). Post-traditional corporate governance. In Globalization and
Corporate Citizenship: The Alternative Gaze (pp. 74-90). Routledge.
Nielsen, B. (2018). Bonds. Investopedia. Retrieved from:
https://www.investopedia.com/articles/bonds/09/bond-market-interest-rates.asp
Yermack, D. (2017). Corporate governance and blockchains. Review of Finance, 21(1), 7-31.
