Concept of maximizing shareholder wealth
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CRITICALLY EVALUATE THE CONCEPT OF MAXIMISING SHAREHOLDER WEALTH AND COMPETING THEORIES
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Response provides the concept of maximizing shareholder wealth and competing theories
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The most important financial goal of the firm is to maximize shareholder wealth as reflected in the market price of the stock. This goal is in conformity with the best long-run interests of stakeholders and society in the long run. (Blackwellpublishing, 2009) As per tutor2u, "Managers of a business should create as much wealth as possible for the shareholders. Given this objective, any financing or investment decision that is expected to improve the value of the shareholder's stake in the business is acceptable. " This is based on the assumption that managers operate in the best interests of stockholders, not themselves, and do not attempt to expropriate wealth from lenders to benefit stockholders. Another assumption is that managers act in a socially responsible manner and do not create unreasonable costs to society in pursuit of stockholder wealth maximization. ...
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