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stakeholder value maximization

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Answer the attached questions with at least five sentences each, >>>thoroughly and in your own words<<<

1. Compare and contrast shareholder maximization to stakeholder value maximization. Describe market forces that influence the ideological tension between shareholder and stakeholder. How does a shareholder define value?

2. Discuss the different options for divesting business units. What are the advantages and disadvantages of each option?

3. What do we mean when we say, "the objective is to maximize shareholder value"?

4. Why is sound capital budgeting essential to the value manager in the new era of maximizing shareholder value?

5. In this new era of seeking to maximize shareholder value, with its resulting pressures to perform, why is there an increased likelihood of corporate fraud in financial reporting (financial statement integrity)?
Message Board Questions

6. In reference to the textbook, explain the concept of ROIC.

7. How does capital budgeting impact a value manager's decision to grow the size of a firm?

8. Why is it important for the value analyst to verify the execution of the business plan of a firm?

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stakeholder value maximization is discussed very comprehensively in this explanation..

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1. Compare and contrast shareholder maximization to stakeholder value maximization. Describe market forces that influence the ideological tension between shareholder and stakeholder. How does a shareholder define value?
Shareholder maximization occurs when there is increase in the wealth of the company. Stakeholder maximization takes place when the objectives of the stakeholders are fulfilled. For instance, the managers get higher salaries and commissions, the employees get higher salaries or more jobs are created and the banker wants his repayments on time. The market forces that create this ideological tension are the opportunities for the shareholders to invest in other companies. The demand for managers in the market and the overall job market in the country can cause ideological tensions. Ideological tensions also happen because the employees want more jobs for employees whereas shareholders want more returns on their investment. Shareholders define value by way of market capitalization or the value of the wealth of the shareholders.

2. Discuss the different options for divesting business units. What are the advantages and disadvantages of each option?
One option for divesting is spin-off. In this method a separate company is created and its stocks are sold off to the acquirer. The advantage of this method is that the company can retain some of the stock of the company and some control. The disadvantage is that company trade secrets and methods of working may go to a competitor. Another disadvantage is that the acquirer may give stock and not cash to the company.
The other method of divestment is to close down the unit and sell off its assets including real estate. The advantage of this method is that ready cash will be realized. The disadvantage is that goodwill, brand reputation and the products of the company may be lost.

3. What do we mean when we say, "the objective is to maximize shareholder value"?
The purpose of the action taken is to increase shareholder value. For instance, if the profits of a quarter are increased more than what was anticipated, the stock prices of shares will increase. ...

Solution provided by:
Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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