This paper aims to consider ways of granting disclosure incentives in order for the Signaling Theory to develop and encompass the Legitimacy Theory. First, the author discusses that ESG strategies for managing stakeholder externalities create real option value that leads to corporate value creation, both as business opportunities as well as appeals to a company’s legitimacy. At the same time as making real option thinking useful for strategic decision-making by management, it is necessary to structure non-financial information disclosure for convincing optionality related to controlling externalities from the viewpoint of investors.Second, at the stage where conditions are not met for companies able to autonomously undertake management with a view to externalities, the author discusses how supplementing incentives for issuing signals regarding differentiation from other companies in the same industry relating to controlling externalities is required in the disclosure of non-financial information in statutory reporting systems. On the other hand, since the materiality of financial reporting is centered on risks and opportunities for business, disclosure regulations are required separately for material social values. Events not originally related to corporate value can create incentive for the fulfillment of accountability of companies by the mediation of “negative intangibles” through reputation.
A Real Option Model of Exchange Risk Exposure