The Price of Misconduct: Volkswagen's Financial Health and Responsible Business Practices
DOI:
https://doi.org/10.22555/ijelcs.v10i2.1432Keywords:
Ethical business practices, Agency Theory, Sustainability, Financial health, Corporate governanceAbstract
This study investigates Volkswagen’s financial and reputational fallout from the 2015 emissions scandal, analyzing its recovery trajectory from 2010 to 2023 through a multi-theory lens incorporating Agency, Stakeholder, Resource-Based View (RBV), and Institutional perspectives. Utilizing longitudinal financial data and OLS regression analysis, the research examines sharp declines in key metrics following the crisis—including a 46% drop in stock price and a negative Operating Profit Margin (-1.90%) in 2015—alongside trends in profitability (Gross Profit Margin fell to 15.89% in 2015, rebounding to 18.9% by 2023), liquidity (Current Ratio from 0.97 in 2015 to 1.22 by 2022), and solvency (Debt-to-Equity Ratio increasing to 28.20 by 2023). Agency Theory accounts for governance failures underlying the scandal, while Stakeholder Theory and RBV illustrate how Volkswagen’s €73 billion investment in electric vehicles and sustainable innovation facilitated trust rebuilding and financial recovery. Institutional Theory highlights regulatory pressures, catalyzing industry-wide transitions toward ethical and sustainable practices. A unique contribution is the linkage between ESG investments and long-term solvency enhancement, advancing a Sustainability-Driven Financial Resilience (SDFR) framework beyond short-term analyses. The study advocates policy reforms mandating ESG strategy integration and governance audits, offering a roadmap for balancing ethical responsibility and financial health in manufacturing contexts.
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