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Do financial managers reallly maximize shareholder wealth?

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Do financial managers reallly maximize shareholder value? Discuss

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Solution Summary

Answers the whether the financial managers follow the fundamental principle of maximizing the shareholders wealth. Presented in bullet format it provides enough information on evidence against it and what shareholders can do to make sure that finance manager stick to the fundamental finance principle.

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Financial managers do not always maximize shareholder's value. They have their own interests in the firm and try to maximize their own interests. Therefore, there is dis-alignment in objectives of shareholders and managers. This phenomenon is called agency problem. The ...

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