Question
Should shareholder wealth maximization be thought of as a long-term or a short-term goal? For example, if one action would probably increase the firms stock
Should shareholder wealth maximization be thought of as a long-term or a short-term goal? For example, if one action would probably increase the firms stock price from a current level of $20 to $25 and then to $30 in 5 years --- but another action would probably keep the stock at $20 for several years but then increase it to $40 in 5 years, which action would be better? Can you think of some specific corporate actions that might have these general tendencies?
Why is profit maximization, by itself, an inappropriate goal?
What is meant by the goal of maximization of shareholder wealth? What does it mean to say that managers should maximize shareholder wealth subject to ethical constraints? What ethical considerations might enter into decisions that result in cash flow and stock price effects that are less than they might otherwise have been?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started